Let’s talk $LMND

Hosted by @Neil 𝕏 · 2026-05-07 · Tags: LMND

TLDR

The discussion presents an overwhelmingly bullish long-term case for Lemonade, arguing that accelerating premium growth, improving loss ratios, strong unit economics, and relatively stable core expenses demonstrate that its AI-driven insurance model is working at scale. Participants view the recent share-price decline as a valuation opportunity while acknowledging capital constraints, dilution, near-term accounting losses, expense transparency, and extreme portfolio concentration as meaningful risks.

Speakers

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Transcript

Neil: I was almost grooving out to the music there for a little while. I don't know. Did you guys hear the updated music? Did you hear that, Josh? Did you hear the, like the music at the start of the space when you're still on hold? No. Oh, you didn't hear it. Anyway. Oh, okay. How's it going, Josh? How are you? Yeah, I'm good, man. How's my audio? I'm on headphones today. Yeah, crystal clear. Good. Yeah. Nice one. Yeah, How are you, sir? You okay? Yeah, all good here, man. So just a couple of housekeeping things. First, I have to always forget to do this. So not financial advice. You're responsible for your own financial decisions, et cetera. Also, is there anybody else who wants to come up a co-host? You can just request and I'll bring you up. Josh, tell us your thoughts. You wrote a great post. Can you sort of rehash some of what you were saying?

Josh: Yeah, thank you.

Neil: Yeah, so I thought I thought I'd put something out there because I've been pretty quiet online and I know that obviously in the past I've put out a lot of bullish stuff and I thought, you know what, I kind of, I feel like, you know, if you're going to be bullish at 100, you should be as loud at 50, right? So yeah, just put out some thoughts. I've sort of been following the company, the markets and so on a bit less in the last few months because I've just been focused on other personal projects. But, you know, obviously I looked at the earnings report, looked at the, you know, the deck, listened to the earnings call. And to me it was a great quarter and I've been struggling to understand the sell off. And so I just wanted to like put my thoughts out there as to like, how I see the investment, how I see the opportunity. And I see I see a lot of posts online, people kind of talking about price action and why are we down at 50 or 60 or whatever. And to me, that's all just noise. So I just put a post out there talking about like my perspective, like a really long term multi multi-year perspective.

Josh: And.

Neil: And you saw the post, I feel like we're completely on track for, when we had spaces maybe two years ago, we talked about how we thought the next two years might play out. And to me, we've played out, exactly as we wanted to. So nothing is off track to me. I guess you, do you mostly agree with those sentiments? Yeah, pretty much. And I think, you know, this, the sell-off is kind of frustrating, but I think that's just sort of something that deserves its own conversation. But I think this quarter for the business was more than just like a regular quarter because it feels like it was the first quarter where the whole thesis around the company materializing is that it gets better with scale and it gets better as it gets bigger with more data, with more customers, with more interactions. And I think we're now seeing that for the first time. So I think it's more than just a great quarter. I think it's that sort of statement that this model is actually working and it's fully evident in the numbers. So if you look at the LTV to CAC ratio still sticking above three to one, and they're scaling that like aggressively. So I feel like that LTV AI tool is probably one of the most underrated parts of the thesis that a lot of people may not fully understand. Like the fact that this is like a tool that's connected into all these distribution channels and has all these different pathways for growth, I think probably needs a little more attention. What do you think, Josh? Yeah, definitely. And I'm just looking at the letter now, the Q1 earnings report. Like everything was good. we had in-force premium up 32%, premium per customer coming up, which is really important for the thesis. the gross profit up at 100 million in the quarter. To me, it's like a really simple math thing that if the fixed overheads are staying relatively flat and gross profit keeps increasing, mathematically we are certain to get to profitability, right? We, once we get gross profit at, let's call it 150, 140 million, even if expenses come up a little bit, we're going to see a net profit. And from that point, you know, you get compounding cash flow and so on, the cash balance will kind of accelerate. And so, as I say, everything to me is on track. I feel like, between us and without kind of giving advice to anyone, we always seem to see a Q3 peak in interest in the stock, the stock price, exuberance around it. And we saw it this year in 2025 Q3. And every year I've always kind of had in my mind, like, if you ever wanted to trim the stock, it would be after Q3 earnings. And then every kind of every year in this period of time, I've remembered like maybe for three years now thinking, the stock price has come down. And I think it's a very cyclical stock for some reason. I haven't quite nailed down yet, but I think it's just to do with how the earnings come in each quarter. Like Q3 is always the best. Q1 is quite often like the least best or the worst. Yeah, it does seem like their sort of general pattern is giving a conservative-ish guidance and then raising throughout the year. But, you know, I feel like there's people who wish they didn't sandbag, and I totally get that. They should maybe, actually, I don't know what the exact capabilities of the business fully are, but it just feels like they're going to consistently post up conservative guidance and then sort of continually beat it over the course of the year. Maybe that is what aligns with a lot of the sentiment and the way that it plays out. Because it just seems like the reaction to each year's guidance is that they're sandbagging. And that does maybe seem to be the case, but it's hard to say for sure. What do you think about sandbagging? Well, I think partly it comes down to the industry. So insurance, I mean, Lemonade is a sort of a slightly different case than the rest of the market. But insurance generally, you do have a lot of conservatism built into the business models. So if you look at a large insurer, by definition and by regulatory statute, they have to be conservative. So for example, in the pricing and the reserving, when they sell a policy, let's say they sell a five year long tail policy, they will have what's called an initial peg or an initial expected loss ratio, and they will anchor reserves to that. initially quite conservative loss ratio pick for like three to five years. And then the regulator lets you release it over time. So I guess Daniel and Shai are slightly separate in that they're primarily tech and tech kind of executives, not insurance executives. However, they will still be operating in that sphere where they'll have insurance technicians and people around them who are conservative by nature. And so I think some of that comes into the sandbagging. And you can't really change that. And to be honest, I would prefer that. I don't mind the sandbagging. To me, it's not a bad thing because it allows us to have quite a lot of confidence in the kind of, in the projections that they do make. Right. Like going back to the Q4, I guess the 2024 Investor Day, Tim Bixby made quite a lot of projections and valuation statements and so on. And I feel like because of the sandbagging history, you could have quite a bit of confidence in what they do say they think will happen. Yeah. I think that's also the way that I tend to look at it, right? Which is if you think about what their really long-term guidance is, as long as they're sort of staying within the range of that path, then it doesn't, I mean, obviously I think you should nitpick things. You try to understand like what's going on with the business and why things might be changing and adjusting. But as long as it maintains that broader pattern, it gives a lot of credence to their incredibility, rather, to their long-term thesis that they're going to hit this like massively profitable business with huge cash flows. Yeah, exactly. And what I would say as well about guidance is, you know, if people look at the Q4 earnings reports and say, oh, your full year guidance is, you know, pessimistic or whatever, What they're really talking about is a timing difference, because if you just shift the time frame by 1/4, then it'll be accurate, right? Even if we said that they sandbagged the full year, then they will hit the numbers. It will just be a few months out from what they said, faster or slower. And so to me, if you're talking about holding an investment for 10 years, which is I'm holding mine for like more than 10 years, really having a pessimistic versus optimistic guidance to me is not really an important thing. I would much rather know what the 10-year, 15-year story is going to be. Yeah, I think the prices we're seeing today, I posted about this, I feel like from a risk-reward perspective as well, just because so much of the thesis has actually played itself out now, and we're still valued around $4 billion. It does seem like the sort of risk reward here is even better at 50. I mean, again, not financial advice and stuff, but I think of how much like fantastic execution they've actually pulled off over the last couple of years. It has actually performed better than I expected. I did not expect them to see the loss ratios in the 50s. And they seem to be hitting it. So yeah, I'm amazed that it is trading at this price, but I think as far as I'm concerned, I'm not really done building out a position in Lemonade. It's one of those things where-- and again, not financial advice, trading advice, or anything, but if you sort of think of it almost in like trading terms, it has such a high expected value just because of how much sort of blue ocean they have in front of them as far as market share. Tim basically said on the call, they have basically what is an unlimited TAM, which is just fantastic to hear. It was really good to hear from the guy Nick said as well. And I posted this one as well, where he made some comments, like very emphatically about how the business is basically showing strength across the board. So that was really great to hear. Yeah, exactly. And on the risk reward point, like you and I had conversations when the stock was at, I guess, 15 bucks, 17 bucks. You know, that it was a good couple of years where the stock went sideways in that sort of range. And we had real conversations about real execution risk, real bankruptcy risk. And, there was a legitimate discussion to be had around will the company survive, will they make it to profitability? And now I think all of those questions are completely put to bed, in my opinion. Never say never, but I really struggle to see how they don't get through the next two quarters, turn profitable, and then move forward from there. Whereas 2 years ago, that wasn't the case, right? You had to see a lot of data points come in over a two-year period to even get to, we're going to make it. And now we've passed all of that. So yeah, I agree. The risk reward here to me is just crazy good. Yeah, I don't understand the market price, to be honest. I just don't. But I guess we'll get there in due course. Yeah, it'll get there in due course. But again, the market can act as a sort of There's a sort of like weighing machine aspect here when you have a larger capital base in terms of what you can, I want to talk about this, but I don't want to go down this rabbit hole right now, but I do think the stock gets battered around at the will of much larger capital players. I'll put it that way. Yeah, I agree. We've seen it right over the years as far as what used to happen in the after hours, what now happens right at the open. It's the same sort of pattern. It's very interesting to observe. Yeah, and to be honest, like it's such an easy thing. You know, if you've got a story stock, which is ultimately in the market's view, what we have is a story stock. It's absolutely battle bound. We believe that story. and other people like Jim Chanos and so on, they absolutely don't believe the story or they say they don't. And the narrative can drive the stock price. Whereas if you have Microsoft or Amazon stock, the narrative can't move the stock because the narrative is pretty much firmly established. And so if you're a hedge fund that wants to, you know, make some regular profit, you're just going to kick the stock price around, beat each side of the move and make regular cash flow. I mean, even I could do it. If I wanted to sit here and trade the stock, I probably could do it, to be honest. And that's with no buying power. That's just with me knowing roughly like where the market is going to move. Which, to be honest, I should. But I'm not at the moment. Interesting. Actually, sorry, checks if anyone else wants to come up on the speaker panel. Nobody. Okay. I mean, if anybody else wants to come up, you guys are more than welcome to join. We'd love to hear from others. So Neil, where do you think we'll be by like Q3? Because I think Q3 is always the high point in the year for earnings numbers for reasons that we won't go into now. We have in the past. But like, where do you think we might be in in-force premium? I guess we're at 1.33 billion at the moment. I haven't actually looked at the numbers and modeled it out, but recently that is. But I mean, I'm just expecting it to continue accelerating. I think the key figure that their entire business is sort of positioning itself around is that growth rate acceleration. I think that top line figure is sort of everything for them. The fact that they've now said, I think it's 10 quarters in a row. that they've been continually accelerating at the top line. And I think that is probably the most important figure. I was having this conversation with somebody in the comments section somewhere. I can't remember where, but I'm sort of thinking about this in the same light that I thought about how people would measure market share for Tesla back in the day. And they would think about, how's it doing in Europe? How's it doing in this part of the world, et cetera, et cetera. But I think some people would push back and say, what mattered here is the top line growth of the entire company. And I feel like that's kind of what matters for Lemonade in the same way. It's just that top line IFP acceleration. As long as they keep that moving and they can keep those expenses relatively flat, everything about the thesis continues to play itself out. And so I'm just sort of monitoring to make sure it does that. It just seems like it's pretty much doing it. Yeah, definitely. And I just quickly did the math. So we're at 32% year on year IFP growth. So if you have, if you have 32% for three years, four years in a row, you get a 3X in in-force premium. So like we're going to go from a billion to 3 billion pretty quickly, like maybe four years if it's 32%. Four years, okay. Yeah, well, I guess we're at 1.33 now. So we've already had one year, so three more years and we should be at like 3, I mean, paperback has all the numbers, right? But just quick off the envelope now, three years from now, we should be at 3 billion of IFP. Which is, that's pretty impressive. Like we were excited when we got to a billion and now we're already at 1.33. Yeah. I mean, what's interesting as well is I think that the company happens to find itself in a position now where it's every day continually making the trade-off between diluting people and growing. Because it seems like with all the strength they have across the business, the thing that is truly constraining them at this point from growing even faster is capital, right? They want to maintain that cushion that they have on the balance sheet. And so they're going to kind of smooth sail it, I think, into net income. Whereas if that wasn't really a problem, if they could raise capital now, maybe dilute somewhat, but then accelerate growth further, it increases the terminal value of the company, right, over like a five-year period, let's say. So I feel like they're sort of in a situation where they're constantly making that trade-off right now. So having a lower share price does impact us long term, because now you sort of have to weigh that, right? Like, oh, do I want dilution or do I want growth? Or, you know what I mean? Does that make sense? Yeah, for me, I'd rather have dilution and faster growth. I wouldn't mind being diluted at all. Like if we were to raise capital and accelerate growth, I'd personally be fine with that. I wouldn't mind at all. Because you've got to think down the road, we're going to have stock splits and so on. You're going to be fine. If the company takes off, we're all going to be good. And that's what I'm thinking, right? It just seems like when you hear when you hear those comments from like Nick Stead and he's saying strength across the business, right? Like I feel like they obviously they're going to do what they feel is best for the company, but it just, it seems like from the outside, they're in this position now where they can press on the gas further and use all those distribution channels. Like that, again, I'm going back to this LTV AI tool, right? Just the fact that it's like connected. And I mean, maybe this is like the easiest thing to do. I have no idea, but it's like, it's connected to all these distribution channels for like TikTok, YouTube, you know, Snapchat, Facebook, Instagram, take your pick, right? It's just all the social media platforms, they're just using all of them. And they're literally targeting the customers they want to onboard through those channels. And again, they're doing all this data-driven. And so it's kind of crazy. I don't think a lot of people will maybe internalize what sort of data you can get from that and how you can use that for... I think someone was telling me there's another company out in the market called Zeta that does a similar thing to what Lemonade's... It sounds like what Lemonade's LTV AI tool does, and it seems like they use all that sort of data. like just better than most companies. And I think Lemonade, it seems like they've got it figured out. And again, sort of going back to for the first time, the business is showing it's actually improving with scale. Like the fact that they're at the fastest growth rate they've been at with the highest, with I think amongst the highest LTV to CAC right now is kind of huge. Yeah, 100%. Like to me, the Q1 numbers were like, if not, probably the second best, I think Q4 were objectively the best numbers, Q4 2025. Q1 26 to me is the second best for a couple of reasons I won't touch on right now. But just on the point you brought up just there about accelerating growth and so on, I would just put out there a couple of points on that. So #1, obviously we know that the more you spend on customer acquisition, the over, you know, that you can do a graph of this and paperback has it. Obviously, the net present value of your customer goes down on average, the more you spend. And even I think Daniel talked about this in the interview he did with you, or maybe with Paper Bag, like the first customer you get when you acquire customers is the best and then the second best and so on. And over time, like in that quarter or in that time period, the quality goes down. So that's one thing. But also secondly, because of the dynamics that, we've talked about, you spend money up front and then you're essentially acquiring the net present value of a customer's cash flow stream or their net present value. And the way the accounting works, obviously we know that the money they spend up front goes directly into the profit and loss day one, but they don't recognize the net present value until it's actually earned out. And so if you were to suddenly double the top line growth, the losses would get much bigger in that quarter. And we've talked, everybody knows, like a lot of investors in Lemonade know about this dynamic, but for those who don't, that's something to really kind of keep your eye on is like the faster the top line growth, the bigger the near term EBITDA losses will be. And that's something else the guys will be balancing. I'm sure they've talked about this on calls, right? They have to balance up. Sorry, go ahead. Yes, because if you got like, you know, suddenly a much higher growth rate, but then the EBITDA losses were that much more negative, the market could have a really negative reaction to that. So there is that balance as well. Yeah, I think they're being very steadfast on this Q4 thing on purpose, right? Because for every dollar they can save rather than bring profitability closer, it does make sense to accelerate growth because it almost makes it such that you reach that inflection point of net income at just like a higher rate of growth. And so you're sort of coming at it with a steeper curve. And I think that makes sense for the business to do. So if they can maintain that Q4 thing, I think just also them being able to maintain this Q4 target and accelerate growth kind of the way they are into it, and they're going to bend the curve back into net income. I think that also says a lot about how much precision pricing ability they have across their book, because it does seem like the way they architected this thing, being day one from it being entirely data-driven, it does seem like if you have this whole thing designed with that sort of thing in mind, and you can analyze all your internal data using that, then You just, you get more for improvement. You know what I mean? Like just having all that data itself. Yeah, 100%. Yeah, I agree. I would be in favor of like, right now we're at 32% in force premium growth. If the company could just spend a lot of money and get to 40%, 45%, if they had the capital, which they don't right now. If they did, I would be 100% for that. But that's from my perspective and your perspective, we're people that have studied the company and the mechanics of how the financials work for, I don't know, four or five years now. So we understand how the interactions work. But I think for the average investor on the street, or not on the street, but like the average investor out there, they would just see widening losses and that could really hurt the story. So there is that balance in that narrative, right, that you have to tread. And I'm sure the board have these discussions, regularly there and they must do. Yeah, it's not something I thought about. What did you think about the stock compensation blend? I mean, to me, it's like the guys are building. a best-in-class global insurance company, they deserve to get paid. In my opinion, I don't care about it. I think they let them get paid. If they're going to stick around and build the company for 10 years, like all the executives have got enough money to completely retire and live on a desert island somewhere. Not desert, but like they can sit around and drink margaritas till the end of time, you know. So We want to make sure they're still around. Like that's probably the number one risk is that Daniel and Chai just say, hey guys, we've had enough, we're off. You know, that's what we don't want. Yeah, I completely agree. And I think. Without them. I was going to say like part of the, I think for the performance part of the award, the strike price is 110, which is arguably, I think, maybe could have been higher considering we touched 99 in January. But it's still, it brings us from, let's say, where we are today at a four-ish billion-dollar valuation to an $8 billion valuation. I think that $4 billion in market cap change makes sense. But again, I do feel like that performance strike could have been higher. Yeah, it could. But I think, if I remember, it's within two years. And I don't remember the start date, but let's just say it's by the end of 2027, 110. I mean, you've got to think, like, most investors are looking for 10% a year. Yeah, no, lemonade's not one of those. The S&P has done like 10, 11% for a long, period of time. So like you and me regularly, we'll be thinking about, oh, when Lemonade hits this number and that number, but we completely forget that translates, like I said in my post earlier today, like all the people that are saying, oh, Lemonade stock has gone down from 100, now we're 54, they're forgetting that they just did 81% compound for two years in a row. And that is crazy. I mean, look, I think that's one way to look at it. But I think another way to look at it is when you find a mispricing as large as Lemonade, especially was, you tend to see material re-ratings, especially when, well, frankly, when you have a bunch of people that have shorted it in the hole, right? So the fact, if you remember when the stock was trading at like $10, $11, the short interest was 34%. It was huge. no, I agree. The stock should have gone up that much. I'm not saying that. I'm just saying like, to go from here to 110 in two years, it's a really good return. Oh, yes, absolutely. Yeah, for sure. I think the, what do you think intrinsic value today of the company? Have you heard, you know, a lot of the estimates say, let's call it 200 in that ballpark range. Do you agree? Yeah. I agree. I mean, I considered selling a bunch at 100 because I kind of sensed that on the day we hit and I was literally at my screen, I had my finger on the sell button and we're coming down from 99.9. And the narrative then was, you know, Elon has tweeted, Elon Musk has tweeted this and, you know, some quite big Tesla influencers have tweeted stuff about the company. And I thought there is no way this is going to stick. If that's the reason it's going up, it's going to go down just as fast. So I nearly sold there, but I thought no, it could go, I'd kick myself a vitro get a short squeeze, which is pretty much why I've never sold at those kind of things. But if I hit 200 in the next six months, I would probably sell half. In the next six months. Yeah, like, yeah. And it could, easily it could. I do think eventually there's just this natural flow of capital where it's going to move at some point from infra to software. But who knows when that's going to be? Infra could go for forever. I have no idea. I think this is the other part of the thing, right? It's like when you look around the market, these infrastructure stocks are moving obscene amounts. I don't know about you, Josh, but in my feed, it's just filled with tons of people celebrating huge wins and semis, like 20Xs, 30Xs. Yeah, I've seen some of that. But like, I mean, for me, like, sure, there's going to be people out there that really understand why those stocks should have done a 20X, if they should have done. But there's also going to be like a huge proportion of people who have just somehow caught on to a stock, held it for a bit, made 20X, if that. And that's kind of luck. And I never look at people that are lucky and say, I wish I was. Yeah, you also can't size into those, right? You can't really size into it once you play. No, you can put in $1000, right? And to say, fine, if it like I had money in AMC once when I was on holiday and I made, I don't know, maybe $6,000 in a week on a 5K investment, something like that. And that was really fun, but that was just like going to Vegas. That was just an experience, right? But I could easily have lost $4,000. And that's the way I see those big wins, but lemonade is not that. Lemonade is like you can make a really logical case why earnings will go from whatever they are now to whatever they will be in 2035. You can map it out like paperback has done and you can logically predict why EPS will be whatever it will be. You can put on a multiple, you can come up with a stock price and logic says that you're going to be right or in the right range. And that's not gambling, that's just a great investment. Yeah. And the other thing also that I think we miss that people don't talk about much is we talk a lot about the upside, which is the terminal value, 2035 and so on. But there's another side to the whole coin, which is that if the If the management team, let's say end of next year, decided, you know what, we're kind of happy with the size of the company, we want to dial back growth rates and they stop this aggressive marketing spend, then the EBITDA would actually be quite good. And you could see, you know, quite a nice little company with quite regular earnings. let's call it a 20 billion market cap. And, they just settle down, do some stock buybacks, pay some dividends and just leave it there and get to terminal value much faster. That's another good option. So either way, I think we're good. Yeah. You know, it goes back to the broader thesis, but if you do think about it just very conceptually, it is just kind of brilliantly simple what they have, right? Which is, it's like this software platform that's just absorbing insurance cash flows from a broader market, and it's just buying them. And they're just long-term cash flows. And this platform, all it basically does is service its customers and then pay out every now and again when the customer needs it. It's very simple, right? Yeah, yeah, super simple. And all they have to do is just keep executing. They have these huge, huge markets that's available to them. Especially in certain lines, I think the renters and pet we've talked about so many times, but if the team talked about it in Q1, the pet market is amazing because you literally, the AI goes onto Facebook, shoots adverts at particular peoples and demographic groups and so on. A lot of those will translate into customers and then they just dollar swap. So these people are going to pay them, let's call it 20 bucks a month. And then every six months or however long it is, they'll make a little claim, they'll get back 140 bucks. And Lemonade is literally banking that money every single month, right? Because there's no, there's no liability tail. There's no long term liability. It's like if you cancel the policy, we keep the money. If you make a claim, whatever. Goodbye.

Josh: Yeah.

Neil: It's just cash flow, right? It's just such a great business model. And even just like from a broad, from like the system perspective, the thing that makes it equally amazing is it's just like, once you've automated a process, it's like automated in perpetuity. You don't have to deal with it again, right? Maybe you have to go back and make adjustments, but I think even in the future, maybe it'll be AI monitoring the processes, you know what I mean, to make adjustments. I think it is already. I mean, did you? So, I mean, let's go. Let's go to this topic. Did you read Daniel's AI only sort of paper, I guess? I literally I'm so ashamed of myself. I started it and then I got called away. Fair enough. But I did start it, but I need to catch up. There's so much I need to catch up on. Yeah. Well, I mean, it's been some times I read. I'll try to keep it brief. But he's basically talking about AI only, right? So right now, you know, you have a human in the loop, then later you have a human observing what the AI does. But then what happens when you don't need the human observing what the AI does? You just have AI observing what the AI does. That just completely changes the entire what you know of as the end-to-end process. And I guess he was just sort of talking about that transition. And it's kind of, you know, I love these pieces because it really gives you insight into how, like, their North Star is evolving, right? And we get to see like how they're bringing this whole autonomous organization to life. Yeah, I guess in a wider conversation around that, going back to, I don't know, the 90s, the 2000s, the intellectual capital of an insurance company was, not to blow smoke on myself, but a guy like me, right? No, fair enough. Intellectual capital, like I've passed, you know, I've studied, I've passed a lot of exams and so on. I've got some knowledge. So I will show up to work. And not me, but hundreds of thousands of employees across the marketplace will show up to work. We are the we are the capital, right? We're the human capital. The buildings. So that's the building is something, right? But what really has the value is the employees, right?

Josh: We've got this collective knowledge.

Neil: But in the last, I don't know, five years and going forward, at least at Lemonade, that capital is much more nuanced. It's much more a an AI capital and that's what we own, right? And that that's not leaving, when it's had enough or it wants to retire, it's not saying goodbye lemonade. It's literally owned by the company. And so like to replicate that, I mean, it has such huge value. That's why I can't understand the stock price because you've got to think even if Chubb or somebody thought, you know what, I'll buy 10% of it just as a hedge, but none of them have, which is what really, really baffling. It's basically it's basically like. an AI financial company, because it's like this AI algorithm using a company's cash to buy customers from the marketplace using this LTV AI system. And then they have like this backend system that manages it, but then all they're doing is managing the cash flows in and out, right? That's basically, that's basically all there is to it. So it's like, it is like a platform and it's just sort of sucking out cash flows from the world creating this market. It's kind of creating this, I think it'll go on to create this huge pet insurance market because it is one that's very easy to automate, high, what is it, high frequency, low severity, right? And that allows them to sort of turn those algorithms and those flywheels. Yeah, you had that video, it was great, pet market. Great call. Yeah, but also the price, like if the product is 10 bucks a month and very, very easy to buy, you literally a few clicks on your smartphone, Versus, back in the day, 50 bucks a month and you have to phone a broker, they have to send you emails and back and forth. It's just much more difficult to do the transaction, right? And most people won't be bothered. They'll think, oh, the hell with it. I'll just pay my own pets' medical bills. But if it's 20 bucks a month, you're going to buy it. Yeah. And I mean, if you just think from like a data perspective, it's probably easy to find the people who have pets based on the stuff they look at on their social media platforms. Based on their photo. Yeah, their photo. Can they access your photos from advertisements as well? I don't know, but like, I wouldn't be surprised if they're like scrolling Facebook and saying, oh, this guy's just posted, you know, pictures of his Siamese cat. Oh, let's send him an advert. Yeah, of course, yeah. When you and me, you know, if I, if I watch some YouTube videos about, you know, XYZ car product, later on in my Google completely separately, but I'm going to see adverts for that kind of thing, right? So Google knows what we're looking for. Google is going to be selling that information to Lemonade and then giving them placements in YouTube. It's all going to be like a big ecosystem that we don't know about. You think they ever, okay, so let's just humor me for a second. You think if they ever really blow up, expand huge, they're going to go beyond insurance? Because even if they never did, they'd be fine. They would still continue to grow massively. And let's just, assume that they could. If that did occur, would you ever see them branching off into any adjacents? I mean, what I think what you could see is you could see the company become something like a Berkshire Hathaway in that the core lemonade products over time could generate so much cash flow that has to go somewhere, either into stock buybacks or maybe just other things. I don't know. But I think the platform could translate to other kind of other products. The problem, of course, is that by the time we get to 2035, a lot of the other industries will already have a big platform, like you have Upstart and other people, right? So it's like, where do you go where there's not? Yeah. You know, I remember long term, one thing I'd always thought was that Lemonade would get bought out by Apple. Because if you sort of looked at the direction Apple was going in as far as building out this whole product suite of lifestyle products. You know, you got headphones and I have the Apple card, right? So I saw my use account and it's a great product. Like it's great the way it just works through your phone. You basically don't need a wallet. You don't need to carry anything around. And like, if you can imagine, insurance rolls up so nicely into that package. And it's like, you wouldn't even need to change a name. It'd be like Lemonade Insurance brought to you by Apple or something. You know what I mean? Like, it just makes sense to have it directly on your phone. And imagine that distribution network, you know, through Lemonade. I would not at all be surprised if someone came along in a year or two and said, oh, we'll buy the whole thing for 10 billion, because that's really not much money. Like for a big consortium or like for a few insurance, let me just Google Chubb Cash Balance. Let's see, what do we get on Google? So as of 2026, Chubb maintains cash and short-term investments of approximately $7.5 billion. And of course, they are backed by, or they're partly owned by Warren Buffett. So Chubb could easily buy Lemonade with a bit of leverage. I wouldn't be surprised. I've always thought Chubb might buy them. Yeah, but it's not a good fit, right? Lemonade needs a tech. If ever they were to get bought out, they would need a tech acquirer, right? Because someone who already has a distribution network, if you could... Yeah, but that would be massive. It depends who you're talking about, because some companies, Chubb is quite a sophisticated company. And originally, pre-2016, Chubb was called Ace. And Ace was a company that was a startup in the late 80s. and they were like a reinsurance capacity company based out of, I think, the Cayman Islands, and they just grew so fast. And then they did this hostile takeover of Chubb in 2016, and then literally... used Chubb and the whole company migrated to the Chubb platform because Chubb was a better company. And I wouldn't be too surprised if Chubb is smart enough to do something like that again, because they're very sophisticated people to say like, oh, you know what, we'll buy this tech platform and then over time we'll literally migrate all of our stuff onto that existing platform and then grow it out from, you know what I mean? I wouldn't be surprised by that at all. Yeah. I mean, how much data do you think these guys have that Lemonade can make use of? I think that would be a big question. Yeah, but separately to that, you don't need to do that. If you've got a legacy insurer and if you buy Lemonade, you could just say, fine, I've got my existing legacy company over here and every year I'm going to migrate 10% of my customers over to this Lemonade platform and then slowly just transition them all. put the old customers into runoff and then attract new customers, like it could be done easily. Well, not easily, but it could be done. So if I, as a big proponent of like the broader idea of Lemonade, like beyond what Lemonade is, you know what I mean? Like the infrastructure, the way they've set up the company, the business model, that sort of thing, I feel like that still has a place in the world for someone to pull off in a big way. And I feel like if a big insurer acquired them, you wouldn't be able to get the most out of the system. Whereas if you were to sell it to somebody who had more data and you could plug into that data network, that's where you'd actualize the most value from this system. Again, it's just one of those things I feel like I really want to see how far this model can go, because if you look at it from that sort of first principles perspective, it does make sense, right, as the business model of the future as a company that does everything software, automated and a give back component. And it's got shareholders and it's got community. Yeah, I mean, it sort of makes sense. Yeah, like we're so early as well. Like we're so early in the story. Ten years from now, there'll be like loads of these kind of spaces, lots of people talking about the company. And realistically, not many people care about the guy. I mean, a few early people on X do. Yeah, it's still small. It's very, it's a very niche. Yeah, I agree. Yeah, I mean, I really want to be part of the story. I just want the, I think the company stock price and everything could grow 30% a year for like 20 years. And it'd be so cool to just hold the stock, just be part of it. One of the other things that's I don't know, maybe secondary, maybe secondary the whole thing, but like they're going to have this massive pool of capital as well, their float, right? And that's going to get used in some way. So that's a huge war chest as well for the company to be. Well, yeah, especially with interest rates at 5, 6%, you know, I think they'll do a capital raise. I don't know when, but let's just guess at 20 billion market cap, they raised another billion dollars. I think they would raise. I think they would raise before that. You think? Yeah. I think if they got back to 10, it would be a no-brainer. Yeah. Issue like 10% for 1 billion. Yeah. That'll be. Well, I mean, but who knows? I don't know what their plans are. I'm very curious to know what their plans are. Actually, that's probably the one thing that's on my mind now, which is what is their current thinking around capital planning? Because if the messaging is right, that They have literal strength across the business. they've gone beyond proof of concept. And it's like you're in a situation where this is what the capital markets are for, right? You raise money when it makes sense to accelerate your business growth. But you got to do it at the right level. So I don't really know. I want to know what their thinking is. Are there other financial options available to them? Yeah, the thing is that they literally can't tell you because then they'll get front run by the hedge funds and stuff. So they have to do it at the market without notice, really. Of course, but to get some insight into the thinking, I think would be, we have, we'll be out there, right? Because. Yeah, but I don't think we'll get that. I can't see how they could tell us that, because that's insider information, right? I mean, no, I'm not talking about, I'm talking about making an announcement, like letting us know what's the thinking, like, give us an update and maybe one of the, I probably should have threw this question into the set of. Yeah, but I don't think they would, because if you say-- Well, it makes sense to, right? Tell investors what you're thinking. I mean, look, here's the other thing, right? I feel like maybe an option for them, and I don't know if they've thought about this with GC, I don't know if this is even under consideration or could be, but the rate is 16%. I think if Lemonade's numbers are showing up as good as they are sort of suggesting, maybe there's room to lower that rate, then everybody makes more money, right? Because in absolute dollars, I think they'll both be better off. What do you mean, lower the rate and then spend more? lower the rate, spend more. GC gets more money, Lemonade gets more growth. Yeah, but like it's private equity capital. 16% still high. Yeah. It's a profit share, so it can be covered, right? But it's still 16%. So I feel like that's maybe a lever they might have. I don't know. of course it is. I mean, it's a commercial negotiation, right? It's like saying reinsurance is expensive. Well, fine. If it's expensive, go and find someone else to do it for cheaper. You know, I don't know. And to be honest, I think that's the least of our worries. If GC are making 16%, it's because Lemonade is making more than 16%. I'll be honest with you, I just want more growth. Yeah, it just makes more sense. It just makes sense. They can sort of hit it. They can put their foot on the gas. So where would you like, you'll say a year from now, where do you think we'd like to be in top line growth rate? We're at 32%. So I think here's the other thing, right? A lot of people may maybe don't understand that. If you look at like their all their KPI metrics over time on a chart, they're smooth, like all of them. And there's just like one noticeable bump, I think, where the Metromile acquisition happened. Yeah. And otherwise it's just been smooth. Like you can look at it across all of their almost all of their KPIs. I think one exception is maybe ADR was a little choppy for some period. especially in the beginning. But again, I think if you look at if you look at what's happening now over time, they've sort of like smoothed out a lot of the edges. they're encouraging investors to look at things on a trailing 12 month basis. I think again, that makes sense because they're targeting something many, many years out, but that's very, very large, right? So it sort of makes sense to do that. Yeah. And to be honest, that is that's partly why I'm so attracted to the company because my like academic and work background. Just being able to model with that precision and then hit those numbers when you said you would, three years out is just incredible. No one does it. And so it gives you so much confidence if you can go back through the, I mean, it'd be quite a cool project to do with AI is like go back through all of the earnings reports, pull out the targets and so on, and then map it as I think Paperbag might have done this. which of them did you hit and how close were you? And we know from experience that it's super close. And then if you think if we get to the investor day in 2026 and they give us some story for the next three to five years, I think we're going to have a high level of confidence that those numbers and those things will be hit, which is great. Because then you can actually say, right, what's it going to be worth in three years' time? What's my return going to be? So the interesting thing is they have, sorry to cut you off, they have a shelf filing that they did about three years ago, and it's going to expire, I believe, right around the time of the Investor Day. So I'd be curious to see if they either take advantage of that or maybe extend it or file a new one and then try to make use of it. Who knows? I guess we'll see. But yeah, I'd be very, I think one of the other things is they have their reinsurance renewal coming up. Did you hear what Tim said about that? Well, it would come up for renewal 1st of July. Yeah. So I think the message I got from what he said was that they wouldn't go the other way. Like, they wouldn't go back to having more reinsurance. If anything, they would take it down, which was good to hear, because that's just really, again, speaks to their confidence. Yeah. And it is nice to have a better revenue number, even though it all is kind of similar when the nuance. For most people, they're going to look at revenue. So for us as owners of the company, we want our company to look good on paper because we own it, right? We're going to sell it someday. So yeah, I think that's a good thing. I was nervous at the time, but now it's obvious that was a great move. You know what? Again, one of the other things I feel like doesn't get a lot of weight is that Tim says again and again that they're pretty much totally in control of their growth. Yeah. Yeah, they are. And they're going to have they've talked about this. And actually the attack is getting better, right? So it's like, hey, wait, what? Okay. There's many reasons to be optimistic. There are some, would you nitpick anything? What would you nitpick if you had to nitpick something? I don't mean to be dismissive about a lot of things, but I feel like what tends to happen, and I said this in many tweets, is like price action tends to dictate feelings. And I think personally, it's frustrating to see the share price get slapped around. But you take a long-term view. The company, the business itself is getting better every day. And I think Anders commented about this, about like the intrinsic value of the company is basically going up every day because they're just buying more and more customers. Every single day. Every single day, right? Just operates like clockwork. So it's like you're like literally sleeping at night and they're just buying customers and securing those cash flows. If you had a really good model for the company, you could literally look, you could put a dollar value on it and you could just say, This is, I've got, let's say you had 1000 shares, you could have an intrinsic value for that per share and say, yesterday I was worth whatever, $55,000, whatever, or whatever you think the number is. And every single day, I believe that the underlying value increases, which to me gives me a lot of, you know, we talk about one of the terms in actuarial science is called the force of interest, right, where you've got a continuously compounding amount of money and you've got this source of interest. So every single moment in time, the value, like if you think about some savings accounts pay interest monthly, well, if you could have a, you could have an interest account that pays you per second, right? And then every single second. And that's the way I think about Lemonade is like the underlying value is going up continuously in time. And it's accelerating. I own it. And at some point that's going to show up in the stock price. Yeah. Yeah. And again, it's like the crazy thing is they're still accelerating and they're still getting better at their highest rate. So if this trend just sort of continues, how much better will they be getting at another point in the future? You know what I mean? Like there's still an acceleration curve that's also happening underneath the business. Yeah, exactly. But yeah, just on your question about nitpicking, I do think the, you know, they used to have this RFP versus Yeah, that's fair. Switched it to versus employee. I thought, come on, that's a bit, that's a bit cheeky. In the quarter that your expenses go up, that's a bit cheeky. Yeah, it's, I agree. It's a little cheeky, yeah. It's a little bit like, come on, you've had the same chart now. And without looking carefully, you would just look at it and think, great, good looking chart. And you would still the same. You might not tweak, right? And then the other thing is like, whether they should be a bit more transparent in the operating expenses. And I've not even looked closely, but whether it's obvious enough about the interest expense to do with the general catalyst. The 16%. I don't know whether that, yeah, but the actual dollar amount, I think Brian McCormick called it, he found it somewhere and he said it was 17 million in the quarter, which comes in as quite a big component of the operating expenses. whether that should be a bit more transparent. That whole thing has always been a little bit, a little bit great for me. I think one of the most obvious conclusions right now is the token costs, but I don't know if that's true. You know, I've seen people say that. I thought it, yeah, I sort of agree with you that it would be interesting to know a little bit more about what created that big. I mean, is it really big? I didn't see the exact percentage, but I know it was not. We went from 85 million 1/4 fixed expenses to I think 110 in like 4 quarters. Oh yeah, 85 was the number. I always used to cite that number. Like it was only cost up 85 million 1/4 to run the business. I'm sorry? Yeah, it was 85 for a long time. Then it went to 90, then 95. And then I was making models and I said, oh, you know, 95 is an outlier. We can go back to 85. Oh, so it's steadily ticked up to 110 now. Yes, it's 110 and it's going to keep going up because the GC number is going to keep going up. So it's OK. So it's not totally flat, but it's nonlinear. So now we almost need to start collecting data about operating expenses, excluding marketing and excluding general catalyst. And that might be quite a good thing to keep a track of. Yeah, that's interesting point. Yeah, about that, because that makes sense, right? But again, I think the good thing is that all of that stuff is the, and this is part of the sort of like the alpha package, if you will, that surrounds Lemonade, right? Which is a lot of people really misunderstand that debt that's building up on their, that's compressing their book value. It's actually just these loan payments and this loan principal, if you will, from GC. Yeah, exactly right. So you get performance based, right? So it's profit share. So is it really debt compression? So we've talked about this a lot, but for new listeners and so on, the balance sheet, you will have the, whatever the book of debt to GC is, that will be, let's call it 100 million. I don't know what it is, but let's say it's 100 million. That would show up as a liability, but an off-balance sheet corresponding item is the future net present value. or the net present value of the customers that were acquired with that debt. But the asset does not show up because of GAAP accounting, but the liability does show up. So that's part of the alpha is understanding that discrepancy between on and off balance sheet items. Yeah. Well, yeah, that amount's growing, right? Yeah, yeah, it would be. But again, at some point, let's say they did a capital raise and now they had 5 billion of cash sloshing around. It's pretty logical to say, hey, you know what, we'd like to earn 16% internal rate of return on that capital. Let's just get rid of GC and we'll retain those earnings in-house. And then you would get a much cleaner looking operating expenses item. I think that compresses their, then it does literally compress their book value faster in a more literal sense, right? Which way do you mean? If they're using internal capital for customer acquisition, and then they're also covering the cost of the regulatory capital for that customer on the balance sheet at the same time, that compresses the cash balance and the book value at the same time. You know what I mean? So you get like a a double hit, if you will. And that's, I feel like that's what the synthetic agent thing solves, right? So it takes that, the cash flow hit off the balance sheet. Yeah, it takes, well, it takes the immediate cash flow hit off, right? So if you spend- Yeah, the immediate. Yeah, that's what I mean, though. So you don't get that two-way compression. Yeah, But then over, like, let's call it. They still post the regulatory capital, but they use the cash outlay from GC. Yeah, exactly. Yes, yeah, exactly right. so that's part of the thesis and or not the thesis, but that's part of the nuance of understanding the investment is understanding what shows up on the balance sheet and the profit on loss versus it doesn't. It's also, I guess, just while on that topic, it's also If you look at people who mentioned the combined ratio a lot, like the combined ratio is basically expense ratio plus loss ratio. I think that's right, Josh, is that right? Yeah, yeah, yeah, yeah. And basically, in traditional insurance companies, they basically account for customer acquisition on the OPEX line of the balance sheet. Because what you effectively have is, with insurance, because it's so capital intensive with buildings and people, you always have an incremental uptick. in your ongoing underlying operating expenses of your business. And so they sort of consider that spend on cost of acquisition as an ongoing thing, but that always changes your underlying expense line. That's why it's sort of tracked in this way. But if you consider for Lemonade, the cash outlay for the customer is basically just cost of acquisition, and then it's just cash flows. It works very differently. Does that sort of make sense, Josh? You know what I'm talking about? Yeah, it does make sense in as far as customers stay, but obviously some customers will go away and then you have to replace those customers. So that would be an ongoing expense, like the attritional. Yeah, it's like an underlying expense to run the business. Like with more customers, you need more people, more infrastructure, it changes your whole expense line. So it's typically counted as OPEX in that way. It's just a weird nuance, right? Yeah, You should be able to capitalize basically acquisition costs if you're just buying the cash flows. You can amortize it, right? It runs on a schedule. Yeah, But the, yeah, as we said, the accounting does not allow you to do that. Yeah, it's another accounting nuance. Yeah, that's where the gap is. And that's why the book value guys essentially are, they're missing the bigger picture. But interesting, Paperbag showed that book value went up in Q4. Or was it Q1 just because of some PPD? But anyway, that's we're getting quite far down a quite technical rabbit hole now, I think. Yeah, Maybe we should come back. OK, fair enough. I'm just going to go back to my notes and sit back down. Yeah, I think we have to play a waiting game. I can't see. I mean, the thing is, we've been through the same thing for two years now. We had a really good stock price in Q3, Q4, and then it had a 50% sell-off by Q2, like literally. I remember after... Q3, Q4, 2024, we were at 50 bucks and we went down to 25 bucks. I mean, I posted about it at the time. And now like clockwork, we're down from 100 down to 50. So maybe next year we'll be down from 200 back to 100, you know, but higher highs and higher lows is not a bad thing. Yeah, I mean, it's definitely fantastic opportunities for accumulation. accumulation. This is like, it's one of those things, again, it's just size. When you think about what you can do with investing, one of the biggest things is sizing appropriately. And again, I would never encourage people to size without doing really rigorous diligence. But if you do and you feel the conviction behind the fact that the short thesis is as lazy as it is, frankly speaking, it just It just, it's one of those things you can size into. That's basically what I'm trying to do. I'm just, I feel like if you can really think about it, you, I mean, this is the way I'm thinking about it. It's like one of those things, you don't get many such layups. And so, yeah. No, you don't. And like, you have to think if Warren Buffett was, you know, 25 years old in 2026 with 10 million of capital, how much of it, if he really understood Lemonade, how much of it would go in? And he made his career by going big on things like this, I think, when he really understood it and the risk reward was right. And so for me, not advice and I don't recommend anyone. Yeah, not financial advice. But you know, I've put 100% of my portfolio into the company without margin and so on, just the cash position. Because I feel like For me, with my background and my kind of just my work background and training and so on, if I don't go big on Lemonade, like what do I do? I might as well just buy an index and call it good. Like I don't, there's nothing else I could ever know more about than Lemonade. Yeah, I agree. It's I'm in the same boat. Yeah. And there's nothing else that's just this obvious to me. It's like so obvious. that I'm literally like, net present value of the company is X, stock price is Y. There's a big difference between the two. You know, if the stock price caught up to what I believe is net present value, I'd probably sell a bunch because then you should, right? Logically, if it's a fair value. I mean, I think we also have to weigh where we are in the market cycle, right? If there is like a mania about applicant, and look, here's the other thing, man, like, capital markets are there to serve participants who feel like they can grow their businesses and sort of tap essentially credit lines with the market. And I feel like if Lemonade gets an opportunity to do that because everyone starts bidding up their shares, it's unlikely, you know, but you never know, right? Because I think once people recognize the level of nuance, hey, yes. Yeah.

Speaker 3: Hey. I just had a quick question for you guys. I've been following Lemonade for like a year now. I appreciate all the work you guys do. I have like 25% of my portfolio in Lemonade. So I just want to kind of share how I kind of think about it and get your guys' opinion on it. So the market caps around 4 billion. They have a billion in cash, right? So you're effectively playing around 3 billion. And then I'm sort of like looking at the customers that they have and what that customer acquisition cost is. And if another company were to try and acquire those customers, It's a minimum of around like a billion dollars because I'm looking at it like 3 million customers. It's around like $300 per customer for acquisition cost. And then we can look at lifetime value of those customers. It's more like 3 billion, but if we just call it like a billion for to acquire those customers, we're sitting at around $2 billion really that you're paying for the business. Plus they've said that they have the best data and they wouldn't trade data with anyone else. any other company. So to me, I'm trying to like value what that data would be worth for a bigger company, even though I guess for Lemonade, it's not gonna be as valuable as that data would be to a bigger insurance company. So in my head, I'm kind of paying like $2 billion for all the future growth. Do you think that's a decent way to think about it or am I thinking about it the wrong way?

Neil: No, no, absolutely makes sense. It makes sense. 'Cause if you could theoretically buy out the company today for what it's worth, It's like, what are you getting back for that cash outlay? You're getting back a billion dollars in cash, right? You're getting back, let's call it a billion dollars of asset value from what you consider to be the customers. And then you have a 2 billion valuation on the existing customer pool that's generating positive cash flow. So if you just stopped, if you bought the business and then you just stopped the growth, actually, it'd be interesting to know what that number would be in terms of how many cores it would take to pay back what you then paid, where you then break even, you know what I mean? But.

Speaker 3: Right.

Neil: I think, and that's a great way to think about it. it's not, makes sense. I think that's a, I think that's a great thing to look at. Sorry, I won't cut you off. Go ahead.

Speaker 3: Yeah, so just to, I guess, push back a little, obviously, in terms of like opportunity cost, because obviously to me, lemonade is such a no-brainer, but I'm trying to look at it compared to what else I could buy out there. And not to bring up another stock, but just for example, like I'm also looking at like Sofi right now. And when I try to think of it from that same lens, basically, Sofi has, I guess, like 8 billion cash and like 9 billion tangible book value. They're trading for 20 billion. So you're effectively paying like 12 billion for the business, but they have 14 million customers. And that customer acquisition cost is also, I think it's a little higher, but let's just call it $300. If you take that, those two numbers and multiply them, that customer base is worth more like 5 billion value, 5 billion. So you're paying, I guess, 6 billion ish, which is like 3 times the value, but potentially for a lot more growth. And when you look at the lifetime value of their customers, it actually almost exceeds the market cap versus something like a lemonade where it's more equal to Because I'm also like 25% in SoFi right now. And I've just kind of been going back in my head with like, which is potentially better. They're both growing at around like 35%, call it.

Neil: Is SoFi like what is? I mean, I don't want to go too far down a rattle on another company at the moment, but there are many other small caps in the space. SoFi is definitely one of them. If you just sort of think broadly about what these different companies are trying to do, which is approaching business with this technical system that automates everything. That's my loose understanding of SoFi, right? That's what they're doing. And they're just doing it in actual like consumer banking. Is that fair?

Speaker 3: Right, exactly. Yeah, it's kind of similar because they have all these different like products that they're cross-selling. Right. So I feel like both the companies potentially have huge advantages because I know like... For Lemonade to be able to acquire a customer for like renters and then cross-sell them is, to me, like the biggest alpha that they have.

Neil: I think if you're able to look across the market, there's so many of these little companies actually around. So I think SoFi gets put in that bucket, Robinhood gets put in that bucket. There's many others, right? What else can you think of?

Speaker 3: Yeah, honestly, for me, nothing really comes close to that, but it's also, I'm like minimize my risk. So for me, the way I've kind of been thinking about it, especially with like Lemonade and I guess SoFi is what's my potential downside? Like what would another company pay for just their customer base?

Neil: Yeah, So your downside is let's say 50%.

Speaker 3: Right, give or take.

Neil: Yeah, I mean, the one comment I would make is when I, you know, I've looked at a lot of these companies in the past, I've looked at Upstart, SoFi and so on and so forth, Robinhood. And for me, it always comes down to what do I feel good about owning? So, for example, Robin Hood, I, looked at and I should have really bought the stock, but I just, I couldn't really get comfortable with putting a significant amount of money worth into a company that objectively is a little bit shady, just they're taking money for commissions, for trading, nothing against that, but it's just not something that I really get excited about. And the same with banking, you know, if you're going to be lending to people and, you know, quite often in the past at least, companies have been known for, you know, lending to people that shouldn't have been lent to and the whole thing is just, I just don't want to be involved, right? But Lemonade is such a clean story. There's such a good set of individuals running the company. They're trying to do good in the world. And I really can feel comfortable just saying, yeah, I support that. That's something I want to see succeed. And that's a big part of it for me. It's not just about the money. And so that's why I'm very comfortable holding Lemonade because Knowing what I know about insurance and all the work I've done on Lemonade, I think the risk reward is different to the rest of the market because you don't have that competition. Like just in the space you just mentioned there, you know, I don't know the kind of comparisons directly, but for example, you've got Upstart and you've got SoFi, right? So which one is going to win? And I guess for the insurance space, you've got Roots, I guess, and you've got Hippo. Oscar, yeah, a whole bunch of others. They're not directly comparable because Lemonade is the only really truly integrated. That's what it seems like. Yeah, like it just feels different to those companies. There's one other thing, and this is what I've always tried to loosely do is kind of look at metrics of different companies like in the same way, right? Like if you look at the sort of KPI curves for Lemonade, how they're all just steady, right? They're very, very steady. And they're inflecting in exactly the right way, exactly as they said. And it's very consistent. There's really not much choppiness. at all. And I think that's the thing they're really trying to maintain, right? This steadiness of the business. And if you look across a lot of other stocks, you do see companies having to readjust strategies, scale back at times, scale different metrics at times, but in ways that can be very jarring to the sort of performance expectations of the business. And it's sort of volatility and quality of revenue and all the different factors that surround that. Yeah, that is exactly it. It's the quality of earnings. Like you just compare a chart of the KPIs of Lemonade versus Roots and you can immediately see the quality difference. And that's why Lemonade always gets my vote. I do see we've got Anthony's come up. Anthony, you want to jump in?

Josh: Yeah, I guess. Can you hear me OK? Because I've had some problems with my headphones.

Neil: Yes, hey there.

Josh: Yeah, Thanks for setting this up, by the way. It's really good to hear everyone's thoughts and things. I mean, from a personal perspective, I'm also kind of really happy with the queue numbers and general progress of the business. Obviously not so happy with the stock movement, but it's short term, hopefully, as you say. And going back to, I have a few kind of topics or subjects that I think it'd be good to touch upon. One is a kind of detail, but it might explain alongside other factors, some of the short term movements in the stock. You mentioned this stock based compensation earlier and I agree that the guys, they deserve to be rewarded. You can kind of say it's overly generous or talk about their, you know, the price targets that they've got to meet. But there's another thing that which hasn't been really discussed in my view is there's share reduction count of particularly Michael Eisenberg between the 2025-2026 proxy statements. And it might be absolutely nothing, but it might be something that, yeah, that Schwartz have kind of jumped upon. So just for context, because you've really got to dig into these reports to see. his reported shares have dropped by approximately 40%. It's a lot of shares, about 800k. Now, I've done a bit of digging and it might be that some of these shares have just been reassigned to other members of other people working within his his company, Aleph. But it's it's pretty murky. And I just wondered if anyone knew anything about this and whether that could explain some of the some of the movements.

Neil: Yeah, I saw your post actually on this. I was considering whether to tag him in there, but it didn't seem right at the time. I tend not to focus too much on like ownership changes unless it's material. But if you're saying, did you say 40%?

Josh: Yeah, that's what it seems. So it's really strange because he's obviously one of the early investors and he's a major, major shareholder and director. I did shoot a couple of emails off to investor relations because I hope it's just nothing to worry about. But you know, when you see these when you see these big moves, It can be spun by shorts or people want to, because it's narrative warfare, yeah. It's narrative warfare, if a director, if you spin the story that a director or an early investor is not confident in the stock and he's pulling stock, then it's a really big deal and it's not an insignificant amount.

Neil: Yeah. Let me jump in. You got to remember the context, right? He is a he's a very, very successful business person. He's running a capital fund and I'm just looking on Wikipedia and it's saying, you know, it's an early stage fund with 850 million under management. It's invested in over 50 companies, including Lemonade. If you are him and a very, very good founder walks in the door and they're doing a funding round at a 50 million valuation, and you want to jump in for 20%, you need $10 million, you're going to sell some Lemonade stock. You know, if you think the next Lemonade, because don't forget he's like pre-IPO, he's a pre-IPO investor. Lemonade is one of the public companies that the fund owns part of. I wouldn't look into, I wouldn't worry too much about him selling stuff. I just think he's going to have so many opportunities coming his way that Lemonade are 80 bucks, It might make a lot of sense to sell, Simon, because he might have an 1000 X opportunity in front of him. He might have gotten 1000 X. You know what I mean? Yeah, exactly. He's probably made 1000 X. I think he was the founding. He was one of the founding guys with the guys, if I'm not mistaken. Exactly right. So I don't know the numbers, but you could say he bought a big percentage earlier. Lemonade. I think it's, you know, I would say it's likely Lemonade was a contributor to his wealth, right? Amassing his amassing wealth. Of course.

Josh: I fully agree, I fully agree, Josh. Yeah, fully agree.

Neil: I think I'm trying to.

Josh: Find I'm just trying to find out if there are if that might be a reason or if there are other reasons, macro or otherwise, because there's a lot going on in the world, to this to kind of explain why there's been such kind of bizarre movements in this in the stock price itself.

Neil: Personally, I don't think you can explain short-term stock movements. There's just too much. And I don't think you need to, I think you just take advantage. the stock market is crazy, always has been, always will be. It's always going to be up, down, manic, depressed, whatever. All you can do is just say, look, what do I think the stock is worth? Not this stock, but any stock. You look at it and think, I think the stock is worth. X. Market thinks it's worth Y. Is there a difference? Is there an opportunity? And you've got to have some real conviction and some real courage to just say, I don't care what the market thinks. The market is wrong. And if you can't stand on that kind of conviction, I don't think you're going to beat the market. If you play it in short-term options, and I did last quarter, that, you know, you're looking at your wounds for that, right? But the market's going to do what it's going to do. If you do, I think the The best way in my mind to think about Lemonade is one of capital accumulation, share accumulation, where as long as the valuation is as disconnected between where it stands and where its intrinsic value is, and even in a scenario where the value could get speculative, where that value is. Because you see companies get bit up to speculative levels all the time. I think this is one that will always have that latent sort of potential, but you just never know. Exactly right. So if you come up in your, if you say in your mind, I think lemonade is worth comfortably in the 150 to 200 range. Let's just say some freak event happens, the market goes crazy, and in, mid-August, we're trading at 300 bucks. Personally, at 300 bucks, I'm selling all my shares and I'm just taking it and saying, let's come back. 300 bucks, that's wild. I don't think that would be insane. I think the only way that happens is if somebody tries to buy it and it doesn't work. Anything can happen in stock markets. Yeah, sure. I certainly wouldn't bank anything on that. No, I'm not saying it will happen. I'm just saying like, so this is what we're saying as a framework. You've got to say, where do I say, hell no, I'm not selling any. And where do you say, yeah, I'm selling everything. You've got to have that range in your head, or you'll get there and you won't do anything. Yeah, sorry, Anthony, I just want to go back to your point. I do think it's worth getting clarification from them if it truly is a 40% reduction, because that is, that's a, do you know what percentage she owned at the company?

Josh: I can't remember off the top of my head. I think I've got it. I've got it somewhere.

Neil: I don't. I don't personally recall if it was like above 2 or 3%, maybe. I think it was like.

Josh: It went. It went from 2.7, I think, to.

Neil: Like one point.

Josh: Two. Yeah. That all the all the rows were misaligned in one of the documents. It went from 2.7 to 1.5%.

Neil: Yeah.

Josh: But as I said, there were, there were some.

Neil: I don't know.

Josh: If and all kinds of stuff. So it could just be that it's been reassigned within his company.

Neil: Yeah. I mean, it could be he sold them, right? But he has to form some, file some forms, right? He does, or I'm not sure.

Josh: Well, that's what, that's what I, mean, I've obviously done all the, you know, the LLM, Gemini, ChatGPT stuff to kind of try and find out. Apparently there should have been some form fours. Submitted, and Gemini Chicken was referring to some, but they just weren't there, either on NASDAQ site or on Lemonade I.R., but yeah, I appreciate the, I mean, it's a detail.

Neil: It's also curiosity, right? It's a change in his stature, I guess, as well.

Josh: And I think it's like to some extent as well, it's really about optics. So, you know, when these things happen, when other directors trim at high levels, they've got every right to do so. And, you know, I think to Josh's point, you know, if you were... the type of investor or individual that Michael Eisenberg is, he's going to want to invest really early stage in lots of other companies. So he's going to be trimming. I'm speculating here, but he's going to be trimming positions that have done very, very well to put it into early seed investments. Yeah, likely. Which is fair enough. But I think just some clarity would be different from investor relations.

Neil: So I do wonder if they give that, if they'll give that. It's interesting. We'll see how they sort of respond because you said you emailed them, right?

Josh: I did, yeah, but I haven't got anything back. So it might some of these things that they might not be able to comment.

Neil: Sure. Yeah. I think it's one of those things where they don't necessarily have to comment, so they might just keep mum.

Josh: Exactly. Because as soon as you say something, it can be, you can be accused of trying to sway the stock, move the stock and impropriety and all kinds of things. Yeah. So yeah, I mean, thanks for the input on that. The other main one that I've been kind of banging on about, and I don't get me wrong on this again, I'm like super, super positive on the general direction of the company. So I'm really nitpicking and trying to kind of pull apart my own thesis. But in terms of Europe, I've been a bit, well, quite underwhelmed, really. When you look at the percentages of growth, they look really, really good, right? But if you think that they launched in Germany 11 years ago, almost 11 years ago now, and the IFP of the whole of Europe is about 5% of total IFP. Yeah, it's for me, I wonder why, I wonder if they're struggling in certain areas and I wonder why they haven't grown. I've just posted something to the community about I just found an ask about where they're actually growing and it looks like they're really, they're actually shrinking in Germany and growing quite aggressively in the UK, which is interesting. I think that kind of level of detail, it's not really discussed or even brought up in earnings calls. I know that Europe is a growth area. I wondered if you guys or if anyone in the call had ideas about why why they're not growing more aggressively in Europe. Yeah. And, you know, in terms of product, like launching new product, like for example, even pet rather than car, and also new countries.

Neil: So I tend to think about it in terms, and you may have missed me saying something to this effect earlier, but I tend to think of it in terms of what are the sort of like top headline figures they're trying to manage the business around. I think that what they're trying to manage it around is that growth rate, right? Like 34%. So wherever they can get the highest LTV to CAC return, because they have so many different distribution options, like if you really think about it, if you think about their entire product set and locations and where it's available and all that sort of stuff, like it's a lot of different places you can sort of like zap ads into and sort of like pick up customers from. So I tend to try to think about it in terms of how well are they maintaining LTV to CAC and how quickly can they keep doing it? Does that sort of make sense?

Josh: Yeah, so to really dumb it down, it's like, where are you getting the most bang for your buck in terms of customer acquisition and how much you spend on that and where?

Neil: Exactly.

Josh: I'm just wondering, yeah, it's difficult to get this kind of information, but I'm wondering how quickly, not just for Europe, but also thinking about car, like how far on are there with regulatory discussions? within different states, even Europe. And it's do you know if we can get that information? I know it was hinted upon by Daniel. I had another listen to the call earlier today.

Neil: I'm not sure. Again, I think that they have to balance like what makes sense to share versus like competitive pressure and like, you know, giving away too much insight. I think they, you know, there's There's, a lot of, there's some secrecy, right? No, please, do, Josh, go ahead. Yeah, so just as a sort of a funny anecdote, there's a headline I saw and I'll tell you the story a little bit. So A German holiday maker has won a payout of almost 1000 EUR after being unable to find a sun lounger for himself and his family because other guests had got there first. So this chap has paid for a holiday. He's gone on this thing and he's claimed on his is claimed against the company and a German court has awarded him 1000 pound compensation because he didn't get his sun lounger. And that's a bit of a, just a bit of a window into the culture in Germany and in Europe more generally. I'm sort of ragging on Europe in the middle of lemonade shell. It's great. Yeah, but like if a court is going to award you 1000 EUR because you couldn't get a sun lounger, then what are they going to do if somebody hit you with their car or they broke into the... You mean filing against an insurance company sort of thing? The courts in Germany are always going to side with the policyholder, right? So Lemonade might have experience in the region and say, hey, you know what, we've tried it. We keep getting hammered in the courts. We're just not going to play in this market, right? So they might deliberately be pulling back. I would not at all be, I mean, don't forget the guys have the data, they've got the insights and they're very smart people. They will have reasons for not being in there, but they probably don't want to come out on record in an earnings report and say, we're not going to go into Germany because their courts are really biased against it. It's just going to be a big thing they don't want to get into because they might want to expand there later. So you don't want to make enemies, right? So if that's the case, you're just going to be very quiet, be a bit kind of around the edges. That would be my thought, is it's more to do with the political and cultural kind of fit with... Interesting thought, yeah. Fair enough. Anthony, what do you think? Does that kind of make sense?

Josh: Yeah, I mean, if you look at the post that I just shared in the group, it kind of, people would hint at what you're just saying that, you know, particularly Germany might be quite bureaucratic and difficult to kind of deal with because they're growing Even in France, they're growing quite quickly. In the UK, they're going like pretty well. Germany is very anti-business.

Neil: Like you look at when Tesla was trying to open a gigafactory, you know, it's going to create thousands of jobs, hundreds of thousands of like supply side jobs. And there was pretty much widespread anti building a new factory there from the German people. And I think the whole mood on the ground is more, you know, we don't want a big business here. I don't know. But I'm not I'm not too worried about that personally. But it's a great point. It's a really good point.

Josh: But I'm very interested to see. Yeah. I mean, you I know you did a. It was mentioned earlier, you made a great video about PET, Josh, a while ago, a couple of years ago, I think now. But do you see them going into Europe any time soon with PET?

Neil: I would say probably more the UK, just on Germany while we were there. I used to work at, you know, many of you know the name, I won't say it now, but one of the bigger insurance companies and the German portfolio was just the worst always. For some reason it never made money and I'm not going to say the company obviously but there was like there was one thing where there was this class action where people alleged that they had been mis-sold some savings product and it was this huge, huge, like in the UK we've got car finance is the big one right now. Everybody's on this class action thing. In Germany they just have class action after class action and the insurance company I worked for had these huge reserves and they lost, every year they lose money in Germany. It just can't be solved apparently. France was not much better. The UK was, more profitable than both of those. So just from that experience, I would guess that the UK is probably more attractive.

Josh: Yeah, I'm just thinking, I'm thinking in the future about just in terms of like whether they launch pet and where, because obviously it's a low kind of value product to some extent, but it's a way to get customers kind of in. And then, particularly in the earnings call, cross-selling was mentioned a lot. And so once you've got someone, once you've got a customer, even if it's for a very, very low amount, then you've got the opportunity to potentially cross-sell a higher value product to them. So, yeah, I think that's where like pet comes in into its own and renters.

Neil: So referencing the video I made a couple of years ago, just off the top of my head, I think the numbers I said at the time were Insurance, so we talk about insurance market penetration that essentially in the pet context would say it would mean like if 1000 people in the country have got a pet and 250 by insurance for their pet, that means you've got insurance market penetration of 25%. And I think the UK was about 25% when I made that video, did the research, but the US was something like 1.22% in that sort of region. And so that was the kind of the big opportunity is that a lot of people in the US have pets, but the market isn't there because Historically, it would have cost so much to sell the policies and maintain the, look after the claims and so on. And as technology allows distribution, that brings prices down and just allows the market to grow really fast. So that's the opportunity. But obviously, if you've already got a big penetration, let's say at the extreme, if you had 100% market penetration, then to grow, that would mean by definition, Lemonade would have to take market share. as opposed to just expand into a growing market where you're not taking share, you're just getting new customers. It'll happen. So I think that's the difference. It'll happen as a function of math, right? Sort of dictates if the system truly is getting better as it's getting bigger, then eventually they reach this point where they can undercut on pricing without even trying. You know what I mean? Like without trying. It just sort of comes as a byproduct. but as we stand now, if you were lemonade, you would much rather grow into a place where there is no market, there's no competition, literally no one is selling the product. You show up and suddenly you create the market. That's where you're going to win, right? As opposed to take market share. It's just much, much easier. But yeah, they will get there for sure. I don't know when though. You know, one of the interesting things as well is like if you sort of look back at home in a different context, Again, I sort of go back to Tesla a lot, but it's pattern recognition, right? So it's like Tesla had this sort of initial foray into China and it didn't go well, right? They had to backtrack, but it was when their second foray into China went really well. That second factory came up at lightning speed. That's when the business was, it got a lot of attention. It was like, whoa. So I mean, if Lemonade can also, they've taken a step back from home, but in the same vein, if they can sort of like make a new push into home, and really actually do well in that, like only operate in the places where the regulators are helpful in letting insurers price rate to risk. I mean, it seems like a lot of regions have turned out not to be, but it's one of those things they can always go back into. And that could be like their China. Yeah, well, the world is a big place. Lemonade can go anywhere. Daniel, I can see Daniel has jumped in. Do you want to step up?

Daniel: Yeah, when you were talking about Germany, I might have some insights since I'm from Germany.

Neil: Yeah, yeah, welcome. Yeah. How you doing?

Daniel: Yeah, but my son just went on my lap, so it might be a bit difficult to speak about it. Yeah, what I wanted to say is I talked to AI earlier before because I also wanted to understand why they are not progressing here. I think So yeah, what you already said, first of all, there's a lot of regulation here. I also have a startup in Germany and it's insane what you have to do. Data protection laws, you cannot use AI with personal data. A lot of reasons why it's hard to do business here.

Neil: And also... Sorry. I don't mean to interrupt you, but you can't use AI with anyone's personal data whatsoever. Yes, exactly. So if you upload like a transcript or an invoice or something, what does it do?

Daniel: Yeah, you're not allowed to put any personal data. There's, I mean, it's been some time since I have worked through it, but yeah.

Neil: Anyway, sorry, I didn't mean to interrupt.

Daniel: It's really hard, yeah. One second, please. Yeah, that's one part. And the other part is that the German culture is they want to save money all the time. There were TV ads a long time where there's a big platform in Germany called Check. So check24.de, you can go on it and you can compare the insurance companies and all the pricing and Basically, a lot of Germans do it once a year to compare the contract that you have for your car, for example, and then pick the cheapest option. I also do it all the time, basically changing my insurance provider.

Neil: Aggregators, right? They're very big in Europe. Is that right?

Daniel: Yes. And they take a lot of share for, yeah, for the, yeah, to take a big cut to.

Neil: Yeah.

Daniel: Yeah. So I don't think it's a good market here. Next thing, I talked on Investor Days to someone from the management. And they also told me that it might have been a mistake to enter the German market. They did it, I think, back in 2019. And when they will come back, they will have to do it with full force. So I think for now, they will grow as well. first and then when they come back with the huge marketing campaign, build the brand here and do it differently than before.

Neil: Yeah, I've always tend to thought of Europe as a sort of beachhead as well, right? They still need time to build, I think, a large enough pool of customers to have good quality data. I don't know if I'm, I could be off base there because it might be worse or better than I'm aware, but it's always seemed like They're not paying that. I think there's been quarters where they did highlight Europe as a growth vector. And I think, but it sort of goes, if anything, to highlight that they just have a lot of different avenues. I guess they do use them at different times, but I haven't looked at the, like, was there a notable growth deceleration in Europe that you're aware of? I think Anthony mentioned it. We went from 33 million to 67 million in a year, Q1 to Q1. It's pretty good, right? Pretty much a double, right? OK, maybe it was the rate of acceleration that slowed down. No, I mean, it's pretty good. The acceleration is accelerating. Yeah, consistent growth, 33, 43, 51, 60, 67 million in IFP for Europe. But yeah, I think that's going to be mostly in the UK and France. And I think Germany will stay. I mean, we saw the chart that Anthony shared just now. Germany is pretty much flatlining and UK and France are growing really fast. Which makes sense. Like for me, it makes sense. Like having worked in this in the insurance space. I just know Germany is a very, very tough place to do business. They've talked about having dynamic pricing there as well, right? So they can actually, I don't know how frequently they can actually do this. I don't know if you can do it in Germany. The UK, you can do dynamic pricing, but I'm not so sure about Germany. I think there's quite a lot of regulation. I'm sure Daniel will know as well.

Daniel: You mean in your car with the devices?

Neil: That, but also are you allowed to just say to a customer, oh, your price is going up 20%?

Daniel: Yeah, I guess that's you can do that, but it's not many people are doing it.

Neil: It's rare here. And if you've got a culture where everybody goes to a price comparison site once a year, you literally are not going to win because every year it's just a fight on price. Whereas the way an insurance company will make money is they'll onboard you and then you stay with that company for 10 years, right? That's the whole thing about the metrics we study. But if everybody goes back to the price comparison every year, you're not going to win. To compete where you have the advantage. Yeah, exactly. Like you want to find sticky customers and people that aren't so price conscious. I've never had insurance. Do you know what the statistic is? Have they updated it as far as how many first time customers? I think it was like, I think it was like 90% at one point. Did it drop down to like 70 maybe? but a lot of their market is just people that have never bought a policy. Yeah. They rent their first place, buy their first house, get their first pet, they go straight to Lemonade. We've got another request. Let me bring that on board.

Josh: Just on that point, Josh, this is a bit of speculation and maybe you guys will know more about this. I know that, you know, early days and still now Lemonade are trying to attract younger customers and just from, you know, life experience. When you're younger, you haven't got as much disposable cash, let's say, you do tend to shop around, right? And there are all these comparison websites that compare the market with this meerkart in the UK. When you get older and you kind of, you need more insurance products and what have you, time becomes, for a lot of people, time and convenience becomes more important than saving a couple of bucks. So do you guys see that as a dynamic that's going to play out for Lemonade? Oh, 100%.

Neil: Like when I was, I don't know, 18, 21, every 10 pounds I had was important to me. because I didn't have a lot of capital. Now, if somebody will save me 10 minutes of time, yeah, sure, take my money, I don't care, like, just solve my problem, take my money, I'm gonna move on, of course, and that's the whole other part of, I guess, great point, really good point you've raised, like, If Lemonade can get those guys on board when the price is cheap, when they're 21, and then grow with them, they can increase the price. And over time, that price becomes less important. Great point.

Josh: Yeah, because I know, like early days, I mean, I was trading around just after the IPO, went out and then back in, I think, around the same time you guys were in. But a lot of the bear comments early days, I remember Dave Lee was saying, you know, they had such bad churn. and then it's kind of stabilized. But it's a kind of metric that I want to look at because you look at kind of consumer behaviors and it's interesting just to see if that changes and if it's difficult to pull churn out, I don't know, because it's kind of wrapped up in different metrics, but it'll be interesting to see as some of the early customers kind of get older and the dynamics that we've been talking about, whether it just becomes even stickier.

Neil: Yeah, really good point. That's a really good insight. I say we've got Mark. Mark, you've jumped up. Do you want to say something?

Mark: Yeah, how you doing, gents? I just wanted to share a few thoughts I had about the latest quarter. I thought it was a great quarter overall. You know, not much to complain about. Though, if I did have to nitpick a few things, Obviously, there is the stock-based compensation. And I agree with the comment Josh said earlier. I absolutely think that Daniel and Shai are, you know, are doing a phenomenal job and deserve to get paid. I kind of wish that some of that guidance had been included at the end of Q4 with, you know, with the initial full year 2026 guide. it does lead to a little bit of dilution that, you know, changes the math. Again, I'm not arguing that it shouldn't happen, but it does change the math a little bit.

Neil: Definitely, yeah.

Mark: The second thing is just the, and Josh mentioned this again earlier as well, just management being a little cheeky with some of the reporting on the like the OpEx there, that one graph that they had, that they swapped out the employee count for the operating expenses. That's the first thing that I can remember in a long time. That's really just rubbing me the wrong way. I wasn't a fan of that. It just felt misleading to me. And I have really grown over the years to trust management and to Like I've listened to countless hours of interviews with the whole management team. And this was the first thing that I've ever seen that like just felt a little bit like a bait and switch to me.

Neil: That's fair. I think that's fair. Yeah, I think everybody, there's no one who's been enthusiastic about that. Paperbag mentioned it in his Q1 debrief video. It was like, I immediately saw it. And it did feel cheeky. It did. No way around it. And it's a bit, it is a bit misleading because it feels like then you feel like, oh, I need to check everything else, right? I need to really get into the weeds and make sure everything else is good. If they're going to start hiding things and moving stuff around.

Mark: Absolutely. Yeah. Just had me, you know, going back over the earnings report with a fine tooth comb. There was also Tim's comments on the call. And I'd be interested for other people's thoughts on this, because I'm pretty sure he mentioned when it came to the dilution, he mentioned something about like a 2% per year, like somewhere between 2 and 4%. And I feel like I was looking at the numbers like quarter over quarter and year over year. And it seemed to me like the fully diluted share counts were were coming in quite a bit more than those ranges. I don't know if he was talking about multi-year averages or what, but I remember my initial thought was just the dilution that I was seeing on their reports wasn't quite matching up to his comments.

Neil: That's interesting. What was the mismatch that you were-- sorry, what was the mismatch you were seeing? What was it sort of like showing itself?

Mark: I'd have to go back and look at the earnings reports there. But when I had the earnings reports pulled up, it just seemed to me like the dilution was coming in more than the targets that he was discussing on the call.

Neil: So you're saying 1% to 2%, we're seeing like, what, 4% to 5%, that sort of thing?

Mark: No, I think I was seeing-- And I could be wrong here, so I'm going back to just try and pull up the reports now, but I thought I was looking at like 8% or something year over year.

Neil: Yeah, that's a big discrepancy. I mean, if that's the case, absolutely worth asking about for sure. I would like to get an answer if that is the case. What do you mean? Do you remember what contact exactly said the one to 2% in? Did he say it was going to be?

Mark: And I don't think he said 1 to 2%. I think he was discussing more like 2 to 4% long-term targets.

Neil: Okay, long-term targets is the context.

Daniel: I guess he said 1 to 2% and something about best in class. I'm just looking it up. I also felt that a little bit off. And also Paperback today released a video about stock-based compensation. And he also calculated some bigger numbers, like 3 or 4%. So I also feel that something is off here.

Neil: No worth worth looking at more for sure.

Mark: Yeah, like I'm just like I've just pulled up the report here. I'm trying to find the share count numbers.

Neil: So they in the guidance we have. the full year share count going to 78 million for full year 2026. And then I feel like for a long time it was like 73 million. I'm going to go back to like an older, let's go for Q4.

Mark: Okay, yeah, so it's saying here the three months ended March 31st, 2025 was 73 million. So Maybe my math was off there a little bit because, yeah, because the full year or the three months ended March 31st, 2026 this year was 76,300,000. So if we do the math on that, 72,9. Yeah, it's more than 4% year over year.

Neil: 4.7%. Yeah, I just see this post on this as well. Yeah, so I'm looking at the... But then I think it stabilizes after that then. Is that what Tim is saying? That it normalizes around 1 to 2%? I'm just trying to see if that sort of makes sense then, right? Because then it's like we get the sort of burst of... I think actually, if I remember correctly, I did skim through PB's video and I saw in the numbers he had in a table somewhere, it did that. It sort of moved, but I didn't actually see the table in detail, so I wasn't sure what it was. I have to admit, I missed this on the earnings call. I only listened to like the first half because I was just short on time. But I did, Paperbag had like 4% a year. and he played around between 2:00 and 4:00. I'm looking at the Q4 24 earnings report and it's saying like full year 25, 74 million and then coming off to the subsequent one year later, 77 million, right? So I guess that's about 4%, I can't remember. It goes from 74 to 77, which is about 4%. Yeah. I mean, there's certainly arguments that could be made about dilution, right? And it's sort of becomes a balancing act of do you feel it is unfair to shareholders is ultimately what you can ask yourself, because ultimately you got to underwrite it, right? That's part of the equity risk you take on with dilution that you're going to have in your ownership. Yeah, but then.

Mark: Okay, you know what? I'm just going back here. I'm looking at the three months ended March 31st, 2023 now. So this is going back. three years and the like the fully diluted share count at that point was 69,300,000. So maybe it's not as big a deal as I was making it out to be because 69 to what were you saying, Josh? 78 by the end of this year. And that's from the beginning of 2023.

Neil: So I mean, I think. Sorry to cut you off there. I was going to say, I think, like, investors across the board at the moment are trying to have them to reconcile stock-based compensation in their minds is actually fixed ongoing costs for these businesses. Because, like, it is actually money out the door, right? Especially if you have, you know, frequent liquidations. That's expense. That's dilution, right? So it's absolutely something you have to factor in. I don't think it's egregiously high. 4% is kind of big for, even if it is for a couple years, but again, it sort of gets, I don't know what their ownership stakes are right now. I think they're around 5 or 6% each, if I'm not mistaken. Does anybody know those numbers? I think it's a bit less, but it's a bit less, but the other point that is worth having is that. When you try, when you're trying to hire executives and senior people and even vice presidents and so on, if you have a choice between I pay this guy 200,000 a year or I give him 100,000 a year and 150K of stock options or 200K of stock options, that's a trade-off that is a business decision. that you're operating in the reality of an employment market where everybody else wants that talent. if you look at like the guys who have left Facebook and gone to Google and from Google to Facebook, they're getting paid these huge packages and there's a competitive market for that talent. So I don't mind Lemonade competing in that market. Like if they're going to *** **** of product from Facebook to come and be head of product at Lemonade. So yeah, that would be great. Give the guy a million a year, you know, in stock options and then that's going to come into these numbers that we're seeing in the earnings report. Personally, I'm like, pay the man, you know, get the best talent, get the best people. Yeah, I sort of wonder, I think that employee base they've had has been pretty steady from, you know, all these years. You know, they've got this base of around, if I'm not mistaken, about a thousand people. I think a lot of 1200, right? Okay, let's say 1200. A lot of those people have been there for a long time. They're probably pretty wealthy on paper. And so I think also granting all the internal people who have made this happen to get that sort of continuity to keep a lot of people around. 'Cause if they are really well off now because of how much their shares are appreciated from that founder stage, that could be enough to keep a lot of people around, I'd bet. But again, I don't mean to be dismissive, I guess. I am sort of thinking at this from a high level about the business as a whole. It's like this pool of 1,200 people They've got this like outfit in Tel Aviv and then New York. And then I think they've got like some claim staff dotted around Arizona and some locations in Europe, but it's sparse, right? So it's really just New York and Tel Aviv. And it's the same people that are growing this company from where it started to where it is now. And I think, again, sort of high level, I would sort of submit to you that it sort of makes sense to maintain that continuity and Cue the people. I think, again, the dilution absolutely needs to get accounted for in modeling, because you have to factor that in now. It's like an ongoing expense for the business. Yeah, personally, I'm like, if the company's going to 10X, I don't mind giving away 10% of it. You know, you're still going to win. I do see we have Cusp. He's jumped in. So Cusp, do you want to join? Yeah, I apologize, guys.

Daniel: I didn't get at the beginning of the call, but I just want to make... a couple of observations as an investor in the company. I think the longer term case is still on track, as far as I can tell, in terms of the fundamental operations.

Neil: But for me, there's a few issues I have with the ongoing communication.

Mark: Which I think is a little bit impacting what valuation it's getting at the moment.

Neil: Investor perception? Not just perception, the communication strategy. I mean, how many times do we want to hear we've beaten our guidance for x quarters ago?

Daniel: I think it becomes a bit of a childish game. For me, when I look at the way the share price was in February, and I'm not going to take the peak, but I'm going to say 80 or 90, and the management team are writing themselves an option for 110, I'm like, really? For a high-grade company with the potential Lemonade has.

Mark: Do you think it's appropriate to write 110s?

Daniel: They've done enough in two years.

Mark: So I think if anyone models this thing, everybody knows, the equity explodes between now and 2028. This is when the equity, it turns profitable. The whole point of Lemonade is it's a top line grower. We'll talk about the gross loss rate.

Neil: Exponential. Yeah. Yeah.

Mark: But the next two years is when the gross profit finally overtakes the.

Neil: Operating cost, which is meant to be growing slower.

Daniel: And then the equity value for the average traditional analyst becomes obvious as it goes to that inflection point. So the next two years, the rubber meets the road for the average investor who looks at PEs and multiples.

Neil: Sure, yeah.

Daniel: And so, yeah, so for them to.

Neil: Go 110 for 30 days consecutive, I'm like, is the board really challenging them?

Mark: Because anyone who's really a long-term investor in Lemonade is really.

Neil: Looking- I agree with you on this point.

Mark: Way, way high valuation.

Daniel: I took a significant stake in Lemonade, lower price, but what I've been frustrated.

Mark: At is the way they communicate, you know, to keep doing this. I know we're gonna, you know, every last quarter they have great print, and then they have stupid guidance within one or two million range. And I'm like, this is childish.

Daniel: You gotta have a range.

Mark: Have a wider range, be in it.

Daniel: You were mentioning an AI company.

Neil: Yeah, so I... Sorry, I didn't mean to interrupt you there, but I did sort of speak about this earlier. I don't know if this is exactly what they're trying to do, but my sense is that they're trying to show that they're really long-term guidance about this being this massively just cash flow machine. has credibility. And so I think they like having this narrative of, look at how consistent we are. And I spoke about this earlier, where if you sort of look at all their KPI metrics, they're really trying to manage them very smoothly. And again, I think this is an underrated feature about the company, which is if you think of it in terms of quality of revenue, consistency, predictability, you know, how sticky are these cash flows, all these sorts of metrics, all of their numbers are very good, they're very consistent, and they just sort of go very smoothly on these curves. If you sort of look at all the charts, all the key business metrics, the only sort of like place where you see it sort of like fluctuate is Metromile, the acquisition. But otherwise, they've all been pretty steady curves. There's not that much inconsistency. So I guess my point is they're just trying to manage to that image and maintain that image so that their future outlook gets that credibility they're talking about. That's my thinking. I don't know if this is exactly what they're trying to do, but yeah.

Daniel: So anyone who invested in Lemonade, and I think most people who have been on this call for a long term are talking and have done, through the bad times, when they got auto wrong initially. It wasn't all their fault. There was a lot of macro things, inflation, learning. They got housing wrong.

Mark: And the way they communicated this was after the event. So what you do as management team, if you're an institutional?

Daniel: Investor, which I was, was, well, can I trust these guys to not **** ** up every quarter, whatever they want to. Yeah. And so instead of going, it's a bit like the stock compensation.

Neil: They knew about this. They didn't put into people guidance. Someone's already said this.

Daniel: So what that does, he just goes, Hmm, you was talking about flat cost growth, top line?

Mark: And so the question I have in my head, and this one comes back to gross off.

Daniel: Ratio, this is the thing that concerns me. Lemonade's at a price where you go, okay, we can't go lower, in my opinion.

Mark: This is well supported around here, technically.

Daniel: And it looks like, the management team wants to pay themselves to drive this to an equity value of around 8 billion, right? And I have no problems with that, but really?

Neil: Know you want a compensation scheme like Elon's where you're going we want to drive this to 50 yeah I 10 yeah I agree with you on this yeah you know you want an ambitious plan you want a more ambitious plan here's the thing I think I think this one is just

Daniel: metric it's a metric only I mean who's done this it's it it we were 80 $80 and we're going 110.

Neil: To me as a shareholder I'm going, what signal is that sending? I think the strike price on that absolutely could have been higher, could have been tiered, but here's the thing, this particular vote is like an advisory vote. We're not actually even voting to approve it. It's like a say and pay thing, right? It's one of those votes. So, whether people vote yes or no, it doesn't really matter. They're still gonna reward themselves with this, because I guess it just goes through their compensation committee. I mean, they totally need to get paid.

Daniel: They're the founders, they're really good, want them to?

Neil: I agree, yeah.

Mark: But the messaging and the communication.

Neil: It could have been better. Yeah, it could have been better. The more ambition is, like, this is a big company, or potentially making it right. We're hoping all of us, this is...

Daniel: Amazon of insurance.

Mark: That's why I've invested. I believe this is the low-cost player in a massive time when the Saudi Ramco, they're seeing price lower because.

Daniel: It can price more efficiently, operate more efficiently, thereby its time is keep growing. But so far, they have not talked about housing because they didn't have competitive advantage. They haven't gone to it. I hope they talk about it in Investor Day. Part of the reason I'm doing this is because I'm-- I agree.

Neil: It's the China.

Daniel: The other thing I'm worried about, And I'm not worried longer.

Neil: Term, but in terms of volatility, we know gross loss ratio has a certain level of volatility, right?

Daniel: It's just normal, right? And the call lines, what this is going on renters, which have been very high gross margin, and pets.

Mark: And then you've got auto grain.

Daniel: So there's going to be some potential subsidence in that gross loss ratio, not because anything structural.

Neil: But the bears, who obviously are trying to spin a narrative, are being helped by this management That's true at times. I agree with you. I look at the guidance every quarter and I just shake my head.

Mark: That's all I do. I go.

Neil: So what do you think? But what do you think they would do specifically that that would change that sort of perception, the way it gets? A wider range. Digestly, whatever.

Daniel: And give themselves more.

Neil: Why set it so low?

Mark: Like they obviously knew about this compensation. That's why we all went, oh, they're going to beat this by 20, 25 billion if you did the numbers.

Daniel: Well, no, they're not because they're going to put it into.

Mark: Had they communicated that, we'll go, okay, fine, it's all on track.

Daniel: But instead, you get these kind of acts.

Mark: It's sort of on goals, in my opinion.

Neil: Now, part of this-- I don't think that they do it with people with that perception expected. You know what I mean? No, but it's just bank-- look, I've done this job professionally.

Daniel: Bankers are like estate agents for CEOs.

Mark: That's the way I describe them, right?

Daniel: And basically, as a fund manager, the advice they give-- Totally.

Neil: And so for me, I'm like, look, grow up.

Daniel: Go speak to your investor base. Elon, the one thing I like about Elon, there's lots of stuff I find frustrating, but there's one thing, he's pretty candid.

Neil: He tells you what his ambition is.

Mark: He tells you what. And at times, Donald's brilliant at this. There's other times, he's going, oh, well.

Daniel: The bank has told us the stock price is down because they just see a ticker. I'm like, they don't just see a ticker.

Neil: People are worried because your growth-- Do they see the ambition? Is that what you're still suggesting?

Mark: No, well, the growth loss ratio at the low's was 150.

Daniel: They're running out of cash and they were in a bind because they didn't have enough capital to blow the way out. And it's only when General Catalyst stepped in with that support for capital that they could accelerate the growth.

Neil: To then be able to get through that track. Right. Because there was more equity risk. Absolutely. Correct.

Daniel: Yeah.

Neil: And the gross risk ratios were a mess at the bottom, right.

Speaker 3: They were like 150.

Daniel: So that's why the price got to where it did. It got in a distressed situation because the shorts were driving down. They didn't have enough capital to invest to grow and they would never have been able to get through it. Now, the General Catalyst moment is when I really.

Neil: Understood, okay, this company supported and he's coming through this. You know, sorry, I don't interrupt you. Go ahead.

Josh: Keep going.

Daniel: So the management team need to remember that, that they made some pretty big errors in that point. And they, I think general capitalists did a great job supporting. They came up with some very innovative stuff, which, and I give credit to Mantle team, but also general capitalist.

Neil: But they also need to understand that at some point, you look at your communication strategy, take the feedback, We do not need to beat and raise by two.

Daniel: This is a game that isn't working.

Neil: The feedback from the market is plus or minus 15, whether you beat or not.

Mark: This is childish.

Neil: Be more grown up. Tesla misses.

Daniel: It comes down, doesn't matter. It recovers because people understand.

Mark: Anyone investing in Tesla, which I also have been a big long-term investor in, we understand.

Daniel: The car business is not worth anything without FSD. The company is FSD and AI and Box.

Neil: If you believe in it, it's worth a different number.

Daniel: It's an option. It's definitely just like a biotech. If the product portfolio comes through, it's worth a different number.

Neil: If it doesn't, it's not going to be.

Mark: With Lemonade, we have this what I call non-cyclical, high growth, repeat business, bit like, in my opinion, Geico was at the beginning, and it has a runway for growth, but I used to see rarely. So if you have this opportunity, new technology coming into an industry, it's not been disruptive for 200 years, right?

Daniel: So here you are, you've got this great opportunity. You're targeting 8 billion.

Neil: I do think, yeah, in that broader context, it does not scream ambition. And I sort of, I said this, I think I said it in a comment somewhere, but I think just given that we were at 99 in January, February, I'm a little bit like, no, we touched ninety-nine intraday at one point, I remember, but let's say the range between January, February, March, where they were obviously talking about this was 80 to 90. but it's $10 up from a fifth year high, from a two-week high, right? So it's like, it could have been higher. Look, I think we could all unanimously agree almost that this strike price on the performance reward could have been much higher. Look, here's the thing. We all as shareholders should have to weigh in on this stuff, right? Like, I would actually like to have seen them have a plan similar to like what Elon has, where it's very emphasis. Very ambitious.

Daniel: People say it's ridiculous. We're targeting a 50 billion market cap in five years.

Neil: Sure, yeah. Everyone says it's a joke, but then you put, you know, these- Eight billion. Yeah, eight billion. Yeah, I feel you, man. I think that's a fair critique. So operationally, I like it. Communications, I scored them very poorly, whether they like that or not. I think the share price is partly in the valuation is reflecting that because people like, how many times do you want to go into Q4?

Daniel: Deliver good numbers and get a bad guide.

Neil: It's 3 years running, all right.

Mark: It is 3 years running.

Neil: Everybody up two or three times. Three years. People are on leverage, which the market is. Oh, you can see that. They all get stopped out and then the shorts come in and drill it, right? So if you're long term, it's great. You buy those options. Nothing changed. Just like people on call options, people, there's now doubled in lemonade.

Daniel: So these things are very volatile. And so you're going to make your share price very volatile.

Neil: What do you think the average fund managers, do you think they're going to dig?

Mark: Down and go, oh, I need to put a big position to this.

Daniel: No, they're just going to ignore.

Neil: That's where the hidden alpha is, though. Yeah, and again, completely. So me-- But I hear you, the communication could do wonders for existing shareholders. Don't forget a lot of people follow 50 days, 200 days, there's loads of algorithms that-- I'd be willing to bet they follow social media now, too. They do. They follow retail. Look, I used to run a small hedge fund, right? A lot of these guys look at retail as targets and they lift these positioning data. Yeah. Master at it, right? And so people think they're dying on GameStop.

Daniel: They were shorting the crap out of it and everyone else was.

Neil: And then they made the money on the way down. Sure. Hey, so actually. Cusp, you kind of know how this whole thing works, right?

Daniel: No, I have worked as a professional, as a fund manager and long-short, right? And I do it for myself now, right?

Mark: So for most of my career, I was an institutional fund manager, right?

Daniel: And I did long-short for about five, six years. Now, I was never a big institution in terms of what I did. But what I do know?

Mark: Is when you're speaking as a management team, any management team that I saw use consultants too much.

Daniel: Or take too much advice from bankers, I basically wasn't interested.

Neil: Because I know they're estate agents.

Daniel: They're basically there. So when I heard Daniel say the bankers are telling you this, I'm like, Daniel, and Shai, you know, you should know better than this.

Neil: And the communication strategy, I think, is almost childish. That's the way I look at it, is childish. No, I think that's where the short perception comes from. When you look at Jensen, when you look at Jensen, he's properly beat and raising. That's a beat and raise.

Daniel: It's not a beat and downgrade strategy.

Neil: Their target market is kind of like big children, if you think about it in a way, right? They're trying to get all these really young customers. There's like a feel to their whole model, like not the model, the brand, it's like this cute, it's like cute. If they did no guidance, that's fine.

Daniel: We have this ambition, this is where we're thinking, these are the numbers, we give the guidance.

Mark: And you go like that, like Elon, like Bezos did. And then you just communicate and people stay on the narrative.

Daniel: And there will be volatility in the stock, I have no problem with volatility in stocks like this.

Neil: It's to be expected, early, misunderstood, loss-making. But there are ways of managing this where you go, did you know what I mean?

Daniel: And like the compensation is, if.

Speaker 3: You look at Tesla.

Neil: I have the messaging. Where is this going? They miss quarter after quarter.

Mark: The stock holds its value, because the narrative is very much held. I think the same will be true with Lemonade, because they do have a good narrative.

Daniel: But that compensation plan, I just went 8 billion. You're kidding me, guys.

Neil: Yeah, I think it's 8.8 billion, if I'm not mistaken. Like five years, you should be targeting 50, in my opinion, right?

Mark: That'd be my opinion.

Neil: Over a longer time period, sure, yeah.

Daniel: You can go to trillion if you want to.

Neil: It's no different to Netflix and Amazon.

Daniel: If you really execute on the model and it is truly scalable, where you have a competitive advantage in operations, pricing, and you don't have operating costs, then why shouldn't you just get a scale up to 20 billion of IFPs, then 100 billion? So that's the dream we're sort of investing in.

Neil: That's it.

Mark: I just want to get that.

Daniel: I want to.

Neil: No, that's fine. I hear. I take all your points. I think a lot of them have merit and I think it's worth sort of airing it out. I mean, if nothing else, right? Like I would hate to not have a space where people can speak their mind because I think it makes the company better ultimately. Well, I hope they get the feedback.

Daniel: And then just go, look, we're going to give wider ranges.

Neil: So we don't beating and raising. is not the only game actually giving yourself ambition targets. And if you miss one, no one's going to care because your target's not just growing 30%.

Daniel: This company should really, I know there's capital constraints, but it could grow 40 or 50.

Neil: It could. Investors have to take the losses, and that's the thing. They need to find. The worst thing you can do in this game is bad, right premium.

Daniel: So if you look at Geico at one point in its history, it got a mess because it.

Neil: Started to write bad premium for growth.

Daniel: So I don't care if they're going.

Neil: That's great.

Daniel: 32%, that's great.

Mark: 35.

Neil: So don't worry if you're beating or missing it by half a percent or percent.

Mark: This is childish, right?

Neil: You should be going. You want them to push ambition, right? Just push it.

Daniel: Yeah, without playing the same game.

Neil: We'll see what they do.

Daniel: That's my only feedback anyway.

Neil: No, and that's fair. That's fair. Look, I think, and it goes back to what I was saying earlier, which is like, I feel like the company, the business itself is in this position to go faster. And the capital markets are not exactly the best thing for it. Maybe I'm not even sure. Maybe they're working on something. I have no idea. Although I don't want to, here's the thing, like there's a lot of upside if they do, if they do get more capital and accelerate go somewhere.

Daniel: I don't mind if they go faster, it's from my experience of fastest growing institutions in finance.

Mark: Because you're writing business today to do in the future.

Daniel: And I know this is short-tail business, it's not as bad as banks which can do this and really blow themselves up, but insurance companies can get themselves in a mess because they just start chasing growth numbers and start writing bad business. So I'm not really interested in that. What I'm interested in, keep the quality high. They can pick and choose, in my opinion.

Neil: At the moment, like Geico, Geico was picking and choosing.

Daniel: The best because they were small, and they're still small, they're tiny in their markets, in auto, they're tiny.

Neil: I'm not quite sure what their strategy with **** anymore is.

Daniel: It's gone to the wayside, and maybe it's because they've got some growth elsewhere they can pick. But on Europe, there was a weird number in terms of growth loss ratio, but.

Mark: There was no real commentary around it.

Neil: And I found that a little strange, given how important that is. I think what messaging they would give-- again, I don't mean to be speaking for them, but I think what they would say is quarter over quarter is not worth the-- because the business tends to move slowly, right? They have renewal cycles and adjusting. I think the big part of the business that, again, it's one of those things that doesn't really get a lot of attention, but it's segmentation, right? So Daniel's talked about moving from rate adequacy to rate accuracy. And if what he's talking about is true, they're able to take these cohorts and segment them down to really fine detail to see where they're priced well and priced not well. And I think that's kind of huge. And I think Again, it goes back to their ability to control their growth and all that sort of stuff. I do wonder where that has its limits. So it'll be interesting to see. Yes, look, we'll all see. I think, for me, that's all I wanted to air. And I've sort of taken a bit of time, but I thought I'd just-- No, that's great. I appreciate you sharing your thoughts. It's interesting to hear. And look, here's the other thing. There's always, I think, and again, I'm not trying to sound dismissive in any sort of way. My general framework to think about Lemonade, and I guess this is worth sharing, is like, again, it's one of those things where when you know something well enough, you can size. into it because there's like this really high expected value. And so I tend to think about lemonade in those terms where as long as they keep doing and they keep things reasonably in line with where they need to be, I think every quarter it's absolutely worth understanding where they're making sort of adjustments and where we might be seeing different things happening. But that's kind of the beauty of it as well, right? The business just operates in slow motion. And that sort of boring predictability is what gives it, I think, again, it's sort of like upside credibility. that they're going to be this thing that they say they're going to do. Now, again, if I sort of just think about, like I'm not a guy who takes like big, like swings around, goes into one name, the other, that sort of thing. Like I find that one sort of thing and I ride it for a really long time. I did the same thing with Apple, with Tesla. I've always sort of thought Lemonade is good, exactly.

Daniel: The same thing as a per manager, and with Amazon, I drew a line, yeah, thirty-three percent growth.

Neil: Exactly thirty-three percent growth, right? All the same thing, correct?

Daniel: And so I went, that's why when I came to Lemonade, I'm like, This is Amazon 2003.

Neil: And you get to see it every quarter, just execution, execution, execution.

Daniel: Amazon rallied from 2003 to 2005, or 2004, four and a half.

Neil: It then had quite a few years of volatility and then finally broke out and then went again. But the business itself, it was delivering most of the time, right? There was moments where it didn't, but.

Daniel: Broadly, the business, and so when I look at Lemonade, that's at core my.

Neil: Very simple, if I had to boil it down to, you could almost boil it down to a linear equation where you go revenues growing at 30%, 35, pretty number. I'm hoping costs grow with.

Daniel: Times around seven, like 30% gross loss ratio minus the cost growing at maybe 7%, 8% is what I'm hoping. So when you just, it's almost like a linear equation like that, right? And so then that just leverages.

Neil: Right forward. Yeah. Yeah. Just keep doing what they're doing, right? Yeah. But I do hear you. I think, and again, we can, and we should, we absolutely should, as investors, go through the details, fine-tooth comb. I don't want to sound like an ***. I don't want to be dismissive in saying nitpicking. I think it absolutely should be done. There is some power to having short sellers nitpicking the hell out of your company as well, looking for every reason to short it. Ultimately, I guess, is Does it change what they're building? This thing that they're talking about becoming, is it still coming to fruition? And I think most quarters, and this is why I'm just loving it right now, is every quarter is just another data point affirming and like seeing in the numbers now, everything that we kind of thought was gonna happen, just sort of happening in real time. Yeah. And I think there's, you know, when that gets recognized. I'm sorry. I'm buying lemonade.

Mark: I'm going back to accumulating quite a bit because my view is.

Neil: It can probably fall to 44-ish, 40 at worst case, but where is this in a year or two? Give it to me. Management's saying 150. So then I'm going, okay, I've got maybe $10 at that time. That's a good point for leaps, long-term. I've got a 10 to 1R. I don't play in options. Yeah. Yeah, so for me, I think leaves make sense. Yeah. Anyway, I don't want to give people productive advice. Yeah, don't, not financial advice. No, but all it is when I look at it from a perspective of downside, upside.

Daniel: Yeah, it just makes sense to me here.

Neil: Anyway, look, I'll end it then.

Daniel: Let's see what else.

Neil: Yeah. Let's bring in Prin. I think you had your hand up for a bit.

Daniel: Hey, Prin here.

Neil: Can you hear me? Yeah, go ahead.

Josh: Yeah, so I agree with many of the points.

Daniel: I just wanted to push back a little bit on this like ranges of in the guidance. Personally, I also hate these absurdly narrow ranges. But as I follow quite a few companies, basically everybody's doing it. And I don't know why maybe Wall Street analysts don't like big ranges in guidance or maybe they are not trained in probability. And I personally, I would like there to be something like 70% confidence intervals, but it's just everybody does that. So maybe they just don't want to be like revolutionary in this and maybe they are addressing like targeting traditional insurance analysts or I don't know.

Neil: Right. It could be, yeah. It's hard to say exactly what the motivation is to do it the way they do it. But maybe Daniel's-- everything he's saying is actually true, right? Like, hey, we're guiding to what we think we can do. But I do think I agree that the optics of the weaker-than-expected guide followed by the stock-based compensation announcement, that could have been done at the same time. I think there's an argument to be made there.

Daniel: But this adjusted a bit shouldn't include SBC, so that.

Neil: That's a bigger debate, right? Like companies and how they report. I do think, yeah, it needs to be considered as part of the operating cash flows.

Daniel: Yeah, but like it's adjusted a bit. I usually the adjustments remove stock-based compensation. So I would expect it's not there. Like I was thinking about it and maybe Like if you have some budget for like for the catastrophes over the years, you kind of you kind of don't know if it comes like Q1 or Q2 or Q3. So and there is I feel that even Daniel mentioned that there is some negative correlation if you have like really bad cat quarter,

Josh: like usually the next one is like a bit it's not so bad. Usually don't you don't have these like crazy cats like.

Daniel: Next to each other. So maybe you just like need to move the bump for one more quarter if you like didn't get some crazy cats in one quarter.

Josh: I don't know.

Daniel: I think the math is not obvious on that. Like if you just, that you should just like subtract all the beats that you had. Yeah. And I also wanted to comment just briefly on the dilution we discussed. So I looked up the comment and it was like the CFO was saying something like, if you take it averaged over five years, you get something around 2% dilution, like he said, one point something to two point something. So maybe up to 2.9 is two point something. So they just-- and it's in the chat, like in the comments of the spaces, the exact quote.

Neil: Yeah, I'm sure someone will flag it like the exact different-- well, hopefully, someone will piece it together the exact discrepancies, and then people-- Yeah.

Josh: Like last year, the dilution was about 4%. So I think it's possible that we'll trend towards like below three over time.

Neil: Over time though. Yeah, I think that's the best thing they're trying to give.

Daniel: Yeah, and maybe one last comment was that what I found a.

Josh: Bit ridiculous was the raise of the EBITDA, the full year EBITDA guide by 1 million.

Daniel: And then like Daniel was on TV somewhere saying how they raised guidance all across the board. So it was like a bit weird because like in the letter when they discussed, I think it was one of the cash flow metrics and it was minus one and they just wrote, oh, it was like flat or like basically around zero. So they like when it suits to them, they round it. When it doesn't suit to them, they just say, oh, we raised by 1 million, so we raised guidance, but.

Josh: It was like a bit so.

Daniel: Manipulative.

Neil: Yeah, I think it's not an unfair characterization to suggest that. Again, I don't know the motivations for changing it, but I think most companies generally try to massage messaging as best they can. Yeah. Yeah, but that's not to gloss, again, it's not to gloss it over. I think absolutely. There's something about patterns. If you see them doing things long-term that are kind of shady, then they're definitely worth trying a lot of attention to. I genuinely love that we actually have this level of detailed analysis on the company, because genuinely, it does help everyone to have a much more informed sort of view about what's always really going on and how they're reporting stuff, most importantly, as well, right? Like, what's the investor messaging? While we're getting things off our chest, in the same sort of, Cusp said, one of his things is about the guidance and the messaging. One for me is the PPD, and that every single quarter we get favourable prior period development, which to me just says that the models are set up to be conservative. And that would also flow into the guidance for the profit for the year. So just to sort of make the point, if we look at the last, I don't know, 8 quarters of loss ratio, every single quarter, we're getting a, let's call it a 4% PPD favorable. Well, if you work out 4% times the premium base, that's quite a lot of profit, right? So as as we go through time and the favorable prior period development comes in, that will come through as more profit than had been expected, right? So that's going to come into the kind of beating guidance every quarter thing. And you think you should be saying, like, if we beat, if we beat, or if we have a favorable movement every single quarter, or maybe our models are wrong. And I kind of raised this point in the Q4 period when the earnings report came out and they were looking at a 9% favorable. And I kind of tagged Daniel and Tim and said, look, guys, can you talk about this on the call? This kind of feels quite important to talk about. They didn't mention it and none of the analysts caught it. But it was a bit frustrating to see. What was it? Sorry, can you repeat what it was? So in the Q4, 25 earnings report, the loss ratio was like 50, 50 something, 59 maybe. I'll look now. And when we looked at the letter, it's because there was a big PPD for motor. Right, that's what gave it the bump. and so there was a 9% favorable PPD, but all of that came into auto. And I'm just trying to find the number here. Where's auto? I think it was something like, yeah, 40% loss ratio for auto in Q4. And it's just a complete outlier, right? And you just got to think, really? Like if I was the reserving actuary, reserving this book of business and I presented that to the board, I would be, I'd be in trouble, you know, to do that in one period. And I'm like, at least explain it to us. At least help us to understand what kind of drives that mechanic. Yeah, it's helpful to know. Absolutely. If there's, if we see, I think at any point we see anything material. shifts in the business, it's always worth getting some clarification on. But it's almost like, do these changes stay? You know what I mean? Because this is a one-quarter aberration so far. Is that fair? Well, no, it's not. This is what I'm saying. So if we look at the reports, so I'm looking right now at the Q4, Q4 25 one. So in the five quarters on this slide deck, we've got minus 5, minus 8, minus 3, minus 5, minus 9. If you have, by definition, the reserves should be a best estimate, which means that you should be able to flip a coin and in a given quarter you should go up or down with equal probability 50%. That's the whole point of the best estimate is that it's in the middle of the bell curve. Yeah, you think they give themselves, do you think they give themselves a lot of variance to play around with all these figures to sort of like massage data into certain like pivot points on the chart? Under GAAP accounting, you're not allowed to. Okay, so you don't give variance. No, so there would be variance, right? So at any given time, the reserves are going to be an estimate and then there will be underlying standard deviation around that from your statistical background in A-levels or whatever. But what I'm saying is you shouldn't have like every single quarter a significant favorable movement. To me, that just says your reserves are too strong. And then it just kind of takes away the credibility of the loss ratio number. Yeah, I'm just playing devil's advocate, but could it also be that being more conservative is helpful from like a regulatory optics perspective? Well, you're not really supposed to be conservative. You're making estimates, right? On business that's future losses, long tail risk, right? Isn't that how it kind of works? Yeah, but under GAP accounting, the The estimates are supposed to be best estimates. Okay, fair enough. Is that a statutory accounting rule as well? You guide in line with what you think? Yeah, So actuaries, or in their case, machine learning would come up with the number and then that should be your number. And then you can have a little bit around it, but you're supposed to, as far as I know, you're supposed to have an explicit, like let's say their best estimate was 75% loss ratio as their kind of peg. and then they want it to be a bit conservative, you should explicitly state that somewhere. And maybe they do, maybe I've missed it. But yeah, it was a bit of a bugbear for me at Q4. Yeah. And I wouldn't know any of that except that this was my actual job, right? And I worked on these kind of things. And so I kind of know how it works enough to just say, come on, really? Yeah, that's good. That's good though. Yeah. We've been going for quite some time. It's been like 2 1/2 hours. I could probably talk for another maybe half an hour. You think, Josh, you want to do another half an hour? Are you ready to call it? I mean, I'm good. My wife and kids have gone away, so I'm good. Okay, let's keep going. Mark, does anybody else want to say anything? We got time.

Mark: Hey, just another thought there I had regarding one of Prince's comments. With the adjusted EBITDA, they raised the guide for one mill for the rest of the year. But this past quarter, they beat their adjusted EBITDA guide that they'd placed in Q4 by, I can't remember, it was four or 5 million. Does that not effectively mean that they're lowering their adjusted EBITDA guide for Qs, like quarter two through four? Like if they beat by four or five mil in Q1 and they're only raising for the rest of the year by one mil, you know, the math implies that they're lowering by the delta there. I think it's 4 million.

Neil: In the stock-based comp, that does it. Sorry, does that make sense? I don't know if that's the-- again, I haven't mapped this back, but I would imagine there's some impact to the guide from-- because the thing they did was they gave the guide in Q with Q4 earnings. And then in Q1, they introduced the stock-based comp plan. I feel like the way they sequenced that might have had something to do with it. Does that make sense? I don't want to say I'm waving away. I'm just trying to better understand as well. The guide changed because it should be more materially higher, right? Is that what we're saying?

Mark: Yeah, I mean, I, sorry, go ahead, Josh.

Neil: Sorry, Mark. Yeah, just to kind of clarify, yes, your thesis is right. We've got a Q2 guide. So we had a full year guide at the start of the year or Q4. Then now, as of Q1, we have a Q2 guide and we have a full year guide. So the full year guide has moved. And as you suggested, it would imply that the underlying EBITDA is getting slightly worse. in Q3, Q4 across those two. So yes, that is there. And then as for the SBC moving it, I don't know. But like, again, this does go back to kind of what Cusp was saying. Shouldn't you have had a plan and like you should have known what that number was going to be when you set the Q4 guidance, right? So why are we moving in Q1 for something that- Yeah, that sequencing is- That sequencing is a little- That's.

Mark: Not a surprise, right?

Neil: Yeah, you can make the argument that sequencing is suspect. But it's not, is it like, again, I think it's a matter of, it's a matter of sort of like investor messaging. I think they certainly could have done it in one go, right? Maybe that would have been the better option. For whatever reason, they chose to do it this way. I do wonder if they thought about the perception that might create.

Mark: Well, it also just makes me think, like I know in a lot of Paper Bags videos, he's kind of.

Neil: Mark? Is it just me? Have I lost him? Does anyone else? No, I've lost him too. Mark, are you there? I'm going to kick him so he knows. Yeah, he must have he must have gone on mute locally. I'm trying to invite him back up. But yeah, I mean, talking of paper bag and the guidance, he's a Q1 debrief video. kind of his thought is that as we go through the year, we're going to, it's going to become more and more clear that the full year guide will get blown away. He's like, you know, could we even see a break even full year 2026? I don't think so, but I wouldn't at all be surprised if every quarter we are kind of increasing. They're not, it's not going to happen. I think they're going to go for growth. And it just, it just makes sense because again, you got to almost like think about it in terminal value terms. You want to come out of that inflection point when you hit net income at the highest rate of growth you can sustain. Because then you're coming, you know, it's almost like if you can imagine like a, like a line, you know, it's like curving down and then curving back up towards break even. And it's sort of like what angle is it coming back towards break even at? right? As they adjust growth higher, that line starts to shift in such a way where when they get to break even, the growth rate is higher than it would have otherwise been. And so they're inflecting out of it at a faster rate, basically, is what happens. And so it makes sense to push growth as long as they can sustain it and still hit their targets. Then I think that's the case. I mean, maybe someone will fact check me on this, but I think the way it works with their business is as they continue seeing more savings and instead of reflecting those savings in, the P&L, they're just using it again to deploy back into growth. It stands to reason, you know, that that inflection changes. And I think that's the point. They're trying to they're trying to stay consistent for that reason because they're seeing savings, I think, somewhat more than they might be expecting from all these like efficiency gains from AI. It's getting pretty crazy. I mean, look, just Claude is just crazy. right? And so if you can imagine they're using this as part of their business processes and stuff like that, yeah, I think it just makes sense to take all that savings and put it back into growth. Yeah, I hope my thinking on this is correct, and I hope somebody will fact check me on this. But again, if they maintain that growth while capturing those savings and just making growth a little bit faster, a little bit faster, they will inflect higher. And I think you sort of want that coming out. Yeah, I agree. So I think basically what we're saying is, Let's say the gross profit increases.

Josh: Let's just pick a number.

Neil: Let's just say the gross profit increases by 5 million every single quarter because we've got more premium, loss ratios stay the same. The math says that we have more, let's say 5 million more gross profit every quarter. Instead of pumping that down to the net loss or the net profit, they just take that 5 million and they spend the whole lot on marketing. And so every quarter of the marketing budget goes up by 5 million. And so it all just gets recycled into accelerating the flywheel. I mean, I would be all for that. That's basically what's, I kind of hope that that's what's playing out. Again, the whole thing about they're getting better with scale is just bonkers when you put it in the face of that. And that's where it's sort of, where I go back to, it's like, they're just, it sounds like they just need more money right now. right? give them a somehow, if an investor could swoop in and give them a massive capital cushion so they can push the accelerated bit, again, it just increases the terminal value. It's just a trade-off of where does it make sense against a dilution? Yeah, 100%. And that's why, like, we want the stock to go up and a capital. Yes, I want cost of capital down. I obviously want to make, I want to be wealthier. Who doesn't want to be wealthier? Yeah. And it just, it also, they just, they deserve more capital, like as, capital allocators, right? They're showing that the money they spend it effectively and they're using basically this AI algorithm to power it. just makes so, much sense. Conceptually speaking, that's, I feel like this is where the business sort of stands right now. There's a big gap between the position they're in and what I think it's being priced for. So let me comment quickly on the marketing side. So I'm just looking at the earnings report. So the three months ended December 31st, 2025, they spent 64.2 million on sales and marketing. Now we know that it costs a lot more to market in Q4. And so the volume would be slightly lower for that dollar amount. But then by Q 2026, sales and marketing has increased to 66.1 million, which if you take into account that marketing, like generally in the economy, it would cost much less to buy marketing than Q4 because of Christmas and seasonality. That means the volume of adverts must be a lot higher in Q1 than it was in Q4. So hopefully in Q2, we're just going to see another blockbuster top line growth over the year. Yeah, I think that LTV to CAC figure is going to be the one to keep an eye on. They keep it up. Yeah. I guess it really becomes a question of when does the market sort of understand the dynamic at play? Because I think Q3 this year, that's why I'm sort of thinking. We always get the best numbers in Q3. We've got Investor Day in November 2026. I'll see if we've got another trifecta of events. Back to the last Investor Day, we had a massive move in the stock in that period because of Q3 earnings were really good. It was Investor Day and it was the Trump election. All the risk assets just ran. Yeah. So yeah, we'll see.

Josh: Guys, just to chime in on like, yeah, we need, this may have been discussed earlier, how to drop out. Yeah. Obviously we need more capital marketing. I had a bit of a discussion. I can't remember who it was with online, along the lines of like the bang for the book and putting the money, you know, gets the best return. But shouldn't we, shouldn't we be looking at the keeping a really close eye on rollout of states? Because if he, if Lemon Air can get regulatory approval for new states that can potentially onboard customers much more efficiently and their cost of acquisition is cheaper rather than rather than going through campaigns. Am I wrong there?

Neil: Yeah, I think I think the state by state rollouts are absolutely worth keeping it on because I think available addressable market always makes sense for the company. I think it's also worth pointing out, though, that like whenever you sort of go in a new location, there's almost like you establish a beachhead, there's like an almost like an upfront cost in terms of capital, because you don't know exactly what your losses are going to be like, your process, your sort of relationships, all that sort of stuff with the regulators and things like that. So I feel like it takes time to sort of like get them off the ground. And so at some point, maybe this is the way I would do it, but You sort of look at your, again, your sort of efficiency on your per dollar of spend out of your business as a whole and what makes the most aggregate sense. And it could be that they're in a situation where it just makes sense to focus on the existing markets because there's still so much untapped. That could be the case. I don't know if it is, but it stands to reason that it could be.

Josh: Possibly. But I mean, you've, I think it was earlier today pointed me back to Neil, and they did say that the cross-selling is really coming on.

Neil: Yeah, I think it's 5%, 16% of IFP or something like that.

Josh: I mentioned that cross-selling and bundling is really accelerating.

Neil: Anthony, you're breaking up, you're breaking up a bit.

Josh: Any better now?

Neil: I mean, try, give it another try. Let's see. Yeah.

Josh: Any better?

Neil: It's still a bit choppy. I'm not sure if it's if you're moving or could be something else.

Josh: No worries.

Neil: Yeah, I think on the states question, like let's not forget how big the states in America are. So like Texas as a market is a huge market. and for a company of Lemonade's size, you could almost say that the state of Texas alone is a green, whatever the term is, an open blue sky. It's just a huge, huge market to be a part of. And then, California, we now have challenges, but it's a huge place. I think there's so much space for them to grow, even without accelerating rollout. But it's always good to see. I think personally, I think that they've got so much room ahead of them just in the markets they're in already, that it's probably more efficient for capital and profit and loss to focus on the places where they're already building out a cool critical mess. That would be my thinking. It's almost like if I were in their shoes, how would I be approaching it? And I would imagine they just, they want to focus on the things that drive the most consistent, sort of predictable, guaranteed outcomes that help them meet their goals. You know what I mean? Like, so if they're trying to meet all these various KPIs, it's like, what's the least amount you have to do with the least amount of risk to make this outcome real? I don't know if that makes sense. Does that make sense, Josh? Yeah, it does. And also, like in the pet market, for example, Pet people know pet people, right? So if someone buys a lemonade pet product, they're going to meet all of their dog walking friends and so on and talk about it, and then their friends are going to buy it, and then it kind of spreads organically. And so I think you're going to get a better return on investment by focusing your spending on a market, getting everybody that you think you can get easily in that market on board, and then moving on to the next one, as opposed to just randomly picking off one person at a time in states, you'd be better off just focusing on a neighborhood in Texas or somewhere. But I ultimately I have a lot of confidence that the guys know what they're doing and I trust them. I trust their strategy and that's good enough for me.

Josh: And that's fair enough in terms of in terms of word of mouth. That's an interesting way to look at it. Just on the again, I asked this think on X some time ago. Maybe you guys know more about the guys who are just ready to put it.

Neil: And then you're sort of breaking up again.

Josh: Yeah, in terms of capital reserves needed, does this, how does this change grows?

Neil: So I don't think it'll affect the capital ratios. We're talking about the stock-based compensation. It was, again, I lost some of your message.

Josh: No, so that as car grows as a product versus homeowners, renters, does that change the capital reserves lemonade?

Neil: Yeah, on like a per dollar basis, you mean, as far as what's the regulatory capital requirement?

Josh: Exactly, yeah. Yeah, I think. And then how does that, 'cause I see that that could potentially allow them to accelerate further. a bit bigger part of the business. Is that correct?

Neil: Yeah, and you're thinking it's correct. And I think that's in large part why they spent as much time on this HOME non-renewal exercise as well. Because I remember looking this up at some point, but the multiples on a per dollar basis for the regulatory capital requirement you had on your balance sheet was higher for HOME than it was for pet renters. So again, it stands to reason that offloading home policies and bringing in a lot more pet and renters onto your balance sheet made a lot of sense for them. And I think that's what they tried to do, and which is why Daniel made this comment about these are our numbers with the non-renewals. So I mean, imagine we didn't have these-- and again, the home is like an outsized product, right? It's a lot of premium dollars. So yeah. I've been wanting to get a lot of clarity around this. non-renewal program and just non-renewal in general. I feel like portfolio cleanup, just generally speaking, I think for any financial company, when you're just managing financial assets and cash flows and things like this, you want to sort of offload your worst-performing lines. And that sort of makes sense. And I sort of wonder-- they probably are. They're probably already thinking about-- I mean, they must know this, right? Their data shows this to them, which is what are their most mispriced policies. And And they probably do, I expect that they're going to have some ongoing portfolio cleanup. I guess that's a broader point. And I think it makes sense to do that to make that portfolio stronger. Does that make sense?

Josh: Yeah, thanks.

Neil: Yeah, just to touch on that, yes, it would be like a multiple factor of like capital requirement for home versus pet. Maybe like, I won't say the number, but I know it'll be a significant factor. And I even posted about this quite a while ago when people were getting excited about the car rollout. I said, look guys, just hang on a second. If we roll out car too quickly, there is capital implications there. Whereas that, you know, whatever the odd block of capital is, if you use that to leverage into the pet market, the renters market, you're going to go a lot further on the gas that you've got in the tank than if you go on the car market, you're tying up capital for a significant period versus in pet. cycles really fast. And again, this is where it goes back to sort of encouraging people to think about it in terms of look at their KPI curves, like some of the top line headline ones that they really want, you kind of focus on. I think they're the ones that the company's generally trying to manage themselves to.

Mark: Yeah.

Neil: There's, I mean, yeah, there's still, I love, I never thought I'd spend three hours talking about an insurance company, but Here we are. If it pays off, you're right per hour on this. That's a really good way to look at it, actually. I'm going to make $1,000,000 an hour. Yeah, we'll see where we get to, man, in the future. I've always thought, you know, a big part of the potential upside is this option that they'll get to a point where the dilution makes sense and the growth acceleration also makes sense. And that'll just drive terminal value even higher. I think that that latent ability is just there for the company. And I'm really kind of wondering how they're thinking about that. 'Cause they must be having conversations. I would like to think that they're having conversations about that, right? Their business is in a pretty strong position. So what are the different things available to them to maybe take it off even higher? Because again, I think there is this, boring, predictable constraint about insurance where they are going to grow, I think, very carefully, very methodically. And again, keep try to keep those curves as smooth as possible. Right. And it does, you know, I think for people who want to see like explosive growth, lemonade's not the stock because it has those capital constraints on regulatory, you know, regulatory capital. But if you're just looking for one of these crazy compounders, like 30%, 30% is still a lot, and they're clocking 34 now. I hope they keep it up. I think that's the main thing. I really hope they keep it up. I think they will. I think we're going to see 32, 33, 34, 35. And, you know, we'll keep ticking up. Then we'll sort of plateau at some point. Let's call it, I don't know, 35, 40. I think 40s in the cards. I think 40s in the cards. But I think that might, like that rate might breach like some regulatory capital limits. So I mean, again, I guess they'll have to see, right? If they can bring the loss ratios down across, excuse me, across the board, it's possible. Anything's sort of possible, but. Yeah, but also don't forget that we're now in the state where the cash on the balance sheet goes up every quarter. Yeah. So for them to get into capital constraints, you have to burn the cash that you're generating. Right. I forgot to talk about that. That's actually another like really weird dynamic they have, right? Because they collect the policy dollars up front and amortize that over the year. Or like the multi-year, right? I don't remember exactly. Yeah, but also don't forget things like... stock-based compensation or a non-cash expense, right? So even though EBITDA is minus 20. Right, and everyone's taking options now instead of stock instead of cash bonuses. You're taking stocks, but you're not taking cash. So the cash balance is going up. If the stock price goes to 200 bucks and that comes in through SBC later, fine, that's whatever. But in cash terms, we're already in a position where cash goes up. Yeah, it goes up every quarter. Cash on the balance sheet is what the regulator cares about for solvency capital. It's not, it's not EBITDA. Right. They're not looking at SBC, are they? Is that true? No. Makes sense. It's cash, right? How much cash you got? Show us your bank account. If the company goes bankrupt, SBC. Right, So they don't really care from that perspective. They just want to know that the policyholders are covered. And so that's our capital constraint. So if you frame it, if you frame it in a different way, you say, actually, is there a capital constraint? Like it might not be. Yeah. I wonder. I wonder. I'm just going to look at the cash. Where's the cash? There's a slide here somewhere of the cash balance going up. I think it's in the end. So let's have a look. Right near the end of the, so total cash and investment over the last five quarters, 996 million, 1032, 1061, 1120, 1138. So that's only going one way and cash is what we care about for solvency. Yeah, it makes sense. So, and obviously now we're still in a non-profitable position, right? But if you were to roll forward, let's say a year or a year and a half, You could, I think you could legitimately see cash balances going up 50, 100 million in 1/4. And then for us to be capital constrained, you'd have to have the liabilities growing by more than that, which feels pretty unlikely. Yeah, and I think that's what they want to keep managing, right? They're in this sort of like fine point of the growth curve, if you will, where they have all these dynamics playing out exactly in their favor. And as far as the cash flow they're getting, you know, the SPC they're paying, the growth rate they're maintaining, all that sort of stuff, they're in that. And that's sort of the thing, right? I think they're going to try to just keep all of these things within this range, have this sort of variability, but keep plowing forward, like towards that much bigger target. Yeah. And it is kind of interesting how the company is sort of like this, vehicle where you can just mess around with all these financial parameters, right? Of course, people will drill into those and see what they're doing, and obviously that makes sense to do. But that's sort of like a tool available to them, right? You know what I'm saying? Yeah, and then back to your point that you made earlier, like could they diversify into another market? And you think, well, actually, they've got so much experience in building this platform that is kind of automated, and they've got this really good financial management system going on where everything is interconnected. Like, when I worked in the market in the insurance industry, you would have actuaries and finance people and a whole army of people all disconnected, kind of, moving models around. And then you'd go over here, talk to this guy and say, what does this do to your model? And then it's all this human framework. Whereas they have a platform, it looks like, where they literally move a dial and it shows them an impact on all of the other outcomes, which is amazing. Right. I'm like, what's that worth as a platform? That's like a Palantir kind of thing. Right. I think, well, I've heard other people describe it as an ontology. I think that's like the new word that gets used. I mean, it makes sense, I suppose, but it kind of is that, right? Conceptually, it's just this big old platform almost. Yeah, and it's worth $4 billion. It's worth $4 billion. That's crazy. So yeah. all right. Well, look, we're coming up. We'll give another 7 minutes just to round out the hour. If anybody wants to say anything, please come up. We've still got some time. It's been like, how many people are here right now? I think it's 30 or something. 27. Yeah, man, this is in the longest. Yeah, we've got a lot to say. Leon, are you going to try to, are you going to try and get to Investor Day? Yeah, makes sense. I'm going to try to get there. I'm going to, I'm going to try. I don't know how we get tickets or whatever. Yeah. Do you remember when that? I think it was November 17th. No, I didn't, I didn't, I couldn't make it. Yeah, I don't know. Does anyone on the call know like how far in advance does availability open up to apply? Hang on a second. You see Daniel requesting? It's just me. Let's see. I don't see him. Daniel went, yeah, that's right. Let's see if he knows. Daniel, you can hear us.

Daniel: Yeah, just now. Yeah, I have another question. When we talked about capital requirements and earlier we talked about the growth in Europe might be disappointing. Do I remember correctly that basically Europe is also the home insurance line. So maybe the capital requirements is also a reason for the maybe slower growth there. What do you think?

Neil: Yeah, it certainly could be. I mean, I don't know the nuances, but I do know certain states in Europe have very particular ways that you have to hold capital. And so you could sell the same exact set of policies in the US versus a country. And you could have a completely different capital requirement. So yeah, certainly could be. I don't know the details, though. Sorry, Daniel, can you repeat that for me? I think I sort of missed what we were talking about.

Daniel: The question? Repeat the question. Yeah, I was thinking about the capital requirements of basically the home insurance line in Europe and if that could be a reason for slower growth there?

Neil: Could be, yeah. I actually do wonder what if, like, what are the regulatory capital requirements for those dollars of premium? I don't know. I don't know if there's a distinction there that makes a notable difference. definitely you can say absolutely home in any country has a very much higher capital requirement than other lines, short tail lines. So that is a given. Separately to that, certain countries will have different regular, different solvency in capital requirements than other countries for the same line of business. And so yeah, it certainly could be a reason. Also, it could be that when Lemonade started out, they were, forgive me if they listened, but they were a bit naive in a way that they went into the wrong markets. So they went into home quite early when they really shouldn't have done. Because I don't think they knew, honestly. I just think they were, they just didn't know. Yeah, that was a critique that I heard from a lot of short sellers that they actually, the harshest interpreter, sorry to interrupt you, but I think this is worth calling out, right? The harshest interpretation of what they did that I hear often from short sellers is that they pump the numbers for the IPO. And so is it true? Who knows? I have no idea. I wasn't really following the company that closely at the time. I didn't really know their growth path. And if this was true, like, you know, some people have said that they were trying to like warn out in the open them against doing this. So, you know, it's sort of interesting to think about it in that sense. But I don't want to make any assumptions. but just to finish off with Daniel's point, like if, for example, there's a block of home business in Germany that really, if the team came to today, they would say, hell no, we're not writing that.

Josh: But it's on the books.

Neil: There might be regulatory controls around it. So they might have to maintain that portfolio, even though they don't want it. I mean, for all we know, they want to like close Germany down and just say, we don't want to be in Germany at the moment. We just don't know. But I I would caution against reading too much into it for or against. I should just think we don't know. And it doesn't really matter. Or it doesn't it doesn't move the story, I should say. Yeah. Anyone else want to jump in with anything? We've got a couple of minutes here. It's been real 3 hours, Josh. Good chat, man. It's been a while since we caught up. I'm actually glad we got to nerd out on Lemonade here a little bit. Yeah, it's good. I'm out of cash. I wish I could buy some more stock, but I'm just out of cash. Likewise, I'm fully deployed. Are we going to have to go back to McDonald's to get a job? That's the way it's going. Could, could be. You never know. Look, what's, you know, I do think about this at times, like what is the biggest, worst case downside for the company? It would be like a series of home losses at this point, right? That would have to be the only way. Because if you think about it otherwise, it's a bunch of pet and renters and car policies. So unless, you know, somebody runs around a street and smashes up every car of every Lemonade customer only, and like breaks the legs of all the pets of people that are Lemonade customers. You know what I'm saying? Like, what's the, where's the worst case outcome here, right? There's always obviously the Middle East conflict, right? That's a real thing, I think. Still actually top of mind. I don't know, what's your actually, you know, what's your take on this? Do you have a take on this? I think it's more, I don't see real insurance risk. Like in the, you can split the risks down into different categories without going off the deep end, but one of them is insurance risk, is underwriting risk and. Sure, yeah. But I think it would be more in the category of like management risk, like management doing something silly by accident or Shy and Daniel getting, you know, God forbid something happened to them. because they are going to be a target, like we've seen AI. AI obviously could disrupt, somebody else could disrupt their model, but I would say that the number one risk for me would be someone crazy comes along and takes out Daniel for some reason, right? He's affiliated with the Israeli government and so on. Is he? Okay, interesting. Well, no, he's from Israel, right? Yeah, I know that, but I know his government affiliation. Not sorry, I shouldn't speak out of turn. He's I'm not saying he's directly connected, but like in the minds of the crazy kind of Palestine protesting. Oh, oh, yeah, that could be, yeah. You know what I mean? They're not they're not going to distinguish between. I suppose if Lemonade goes to plan, he's probably going to be one of the wealthiest people in Israel. Yeah, right. And he's going to be a target like Elon Musk became. Right, yeah. He became successful. And as an Israeli company, there's a lot of people on planet Earth right now, whether I don't think they're right, but they hate, they really don't like people from Israel. And that's just reality. So I mean, that to me, that would be probably up there with the risk. Yeah, that's always good to take note of. It's one of those things, right, though, I guess, when you invest in a company with founders, with key founders, it's like, that's the key man risk you take on. And you either have to risk accept or, but it has to go into your pricing, right? You have to know what you're underwriting. Yeah, and this again comes back to like, we need a capital raise. I think the company has to get bigger because at the moment, you know, having worked in the insurance space, it's a nice company. Everything's really good, but I don't think it's got necessarily the governance and the broad shoulders that a more established company has just because of, you know, the size. The guys are doing a great job, but I just kind of get a feel that there are some things like risk management, and. You play loosey-goosey a little bit.

Mark: Governance and stuff.

Neil: Yeah, like they're just sort of winging it until they get there, which makes sense. But it would be nice to see a little bit more formality, I think. the letters could use some improvement. It's been pretty much the same, right? What do you think? I mean, look, they are giving the key headline figures. I don't know. Maybe I'm being too nitpicky here, but. Yeah, I don't know because there's two ways to look at it, right? One is like they're trying to be disruptive and new and fun and sort of appeal to, but like I get it when you're trying to appeal to your customer base. You want to be fun and you want to be like new and colorful. But when you're talking to the capital markets, I wonder if the tone of the letters should be a little bit more professional. Interesting. I don't know. What do you think on that? I think it, there's, I feel like for a while the letters had a lot of like flair almost, if you will. They were written in sort of like Daniel speak and they had a lot of oomph, if you will. I feel like more recently they've sort of dropped a lot of stuff, which I think is helpful because it's just like it lays out the facts, but it almost then, at times, I feel like the messaging falls a little bit flat. the right parts of the highlights of the business don't pop in my mind some maybe sometimes the way that they should or they or that they could. Yeah. So I'm literally looking at the Q4 25 letter. So we've got the opening thing, which is nothing. Then you've got 4 graphs on the second page, a little bit of, you know, high level, high level stuff, then some graphs, more high level stuff, some graphs. And then that's it. We're into like. Disclaimers, and I mean, there's a bit, but it's not that much, but hey, that's, you know, that's details. What else? I mean, while we're on this topic, let's round this out, right? Like, what else do you see are risks? Let's talk about this, right? Because we've gone 3 hours talking about a lot of upside things. What makes this unwind, right? Like, I think the only other thing I can think of is... there's obviously regional conflict escalation and key man risk and, the staff risk and that sort of thing. Yeah, there's political risk. There's political risk. More blowback bills against Israel. Yeah, that could always be a thing. Yeah, some relation. Donald Trump fell out with the Israeli kind of campus. You know, that could be a risk. If he said, oh, you know what, I'm taking away your licenses. What are you going to do? The president comes out and says, sorry, you're not doing business in New York anymore. what are you going to do about it? Yeah. I guess you could also argue there's always that regulatory risk, right? That it can be weaponized by legacy players against AI advancements and stuff like that. That's something to keep an eye on. And then the other risk is, like we talked about the growth rate, we want to see faster growth, but there is a risk there. Insurance risk. Too fast that you just get your, too far over your skis. Right. So it's capital risk and equity risk and all that sort of stuff, right? There's capital risk, but it's also a flywheel risk. If you go too fast, then you don't have the time to take account of. Like if you were to double your book in two weeks, You don't have the data and the information to slowly, slowly pick out the best bits. And so that, I think that's why they're sort of capping growth out where they are at 32%. Yeah, and again, I think it goes back to this thing we were talking about earlier, which is they're just trying to try to maintain those sort of like those KPI curves, right? Smooth as smooth as possible. Yeah, and you know what, and that as well, I think that Daniel and Shai are like, they've literally got this idealistic view of what a company should be in their minds. And so I think for them, that's almost bigger than the top line, the financials. They just want it to be perfect. And like the KPI trajectory is as close to perfect as you could get. Like the consistency, just how close, just how consistent the bars are on those growth charts and stuff. To me, it's incredible. It's incredible how consistently they perform. And that's been the biggest sort of like de-risking aspect to the whole thing. And they've shown that execution now. It's apparent the numbers. Yeah, like if they were to have done like a root style revenue graph, you just couldn't go all in. You couldn't go heavily on the stock because You just wouldn't have confidence. I'm just looking now at the revenue, year on year revenue growth for Roots. And it's like- If any of you guys are still hanging around, sorry, I'm gonna cut you off here real quick. If any of you guys are still around right now, thinking about this, look up as much as you can on quality of revenue and sort of how that impacts like multiples and valuation. And if you think about Lemonade's quality of revenue and how it does actually fit into a lot of these categories, I think you'll see again, there's like a pretty big mismatch between the way the market judges Lemonade's quality of revenue and like the reality of Lemonade's quality of revenue, even just based on like objective metrics. So I just wanted to get that out before I forgot it. Yeah, 100%. And also like looking at the, in the earnings reports, the revenue, profit and loss charts, I mean, it's just incredible to me. Like you've got a revenue number, you've got the components of it, you've got the the expenses, and it's all pretty clear on the profit and loss where things are going. Yeah, it's an incredible company. It really is. I still can't believe the stock is at 50 bucks. It makes zero sense to me. $4 billion. It's just bananas. Like any day I'm looking for that headline, Geico is acquiring lemonade. What do you think a fair offer would be if somebody tried to put in one? You have to triple it, right? Maybe 12, maybe I'd say. Especially because of the recent peak. They did just peak around, I don't know exactly what the market cap was at that price, 99, but I have to assume it's somewhere around 6 or 7, 8 billion. Oh, yeah, just shy of 8 billion. You're right. Yeah, you're right. It's going to be 8 billion, right? 8 billion almost exactly, yeah. Come on. Let's do math over school. Hey, man, it's late. We've been doing this for three hours, man. Yeah, yeah, no, I'm kidding. My brain is right. I haven't talked to this in a while. I reckon like, I don't know, anywhere from like 10, 12 billion market cap, which would be like a real shame. That would be a real shame, considering the upside available. And that's what I mean. Like, I feel like this is one of those companies, it's almost like you want to see it come to fruition. can somebody build like this totally automated software platform that just takes on cash flow management and client management and automates the **** out of it? You know, that's pretty huge if it works, right? Yeah, and you wanna, you just wanna hold, for me, I just wanna hold the stock. I'm like, I don't know, there's not, there's not much in life, you know, life can get kind of boring. You want there to be some... something to kind of get focused on and, I never thought like the narrative warfare around an insurance company could be as, I don't want to use the word engaging. It sort of is engaging because there's a lot of like false premises out there, but maybe that's not the right word. Do you know what I'm talking about, Josh? Sort of makes sense. Like it's hotly contested. Yeah, I feel like I often get surprised at times the narrative around the company is hotly contested. And there's this massive group of people who love to **** on the company. It's never made sense to me. I mean, you can sort of rationalize it, right, with tribal thinking and lazy analysis and all the stuff, right? No, it's not. It's not. It's in the city. I mean, I think you used to work in the capital markets in London, right? I did. I did, yes. So Canary Wharf is one thing, but in the proper city, there's this group of properly old school, rich English families who their kids have been working in the markets for literal centuries or like a long, time, all going to private schools. They're all in this bubble. Forgive me if anyone on the cool fits into this category. But, you know, there's this kind of inner circle and then Daniel and Shy come along and they're just completely different and they're telling this old boys club that they're doing it all wrong. I think there's going to be a lot of like, screw you, man. We've been here a long time. You're trying to disrupt us. And those people have a lot of connections and a lot of money. And so that's the same thing. And look, here's, let me say this as well. I watched this whole phenomenon play out with Tesla for like 6 years, where it was one of the most hotly debated stocks on the market. It's the same thing with Lemonade now. I feel like it's going to play out the same way. You're going to have these people who don't want to see the company succeed be out in full force. And I think it's worth calling out that the exact hedge funds that would play games with Tesla stock have zeroed in on Lemonade. And you know it's the same core to people that revolves around the Jim Chanos' of the world. the short sellers. You've seen them all active on social media. Have you seen them recently? They're very, very quiet. They've got a lot to say. Yeah, well, they have had a lot to say in the past. Well, I would say though, we don't give financial advice ever. But one thing that does frustrate me a bit, especially in the retail community, forgive me, whoever's on the call that this applies to, forgive me. But it gets frustrating to me where It's so obvious to me that if you use margin and too much leverage on lemonade, you're going to get smoked. You're just going to get smoked. Like the odds are so far against you. It's crazy. But people keep coming back, keep like using leverage, keep getting burned, and then they do it again. And if all of your co-investors are on margin, it's really hard to hold the gates when you've got the hedge funds hammering you because you can't stop them shortening your stock and they're going to drive it through all your stop losses. you're going to get liquidated. And I just think, why do it? Just hold the stock. Yeah, absolutely. Accumulation. It's an accumulation game, and a size one, in my opinion. Yeah. Yeah, I need to buy some more stock. I have a lot of stock, but I'm like, you know when you think in your mind, let's say minimum wage is 12 pound 50 an hour in the UK, right? If I went out and earned minimum wage, When you work it all out, let's say a share of lemonade costs you 3 hours of your labour, right? If you want to be basic like that. But you could think like that three hours of labour buys you one share of lemonade. If things play out the way that they may play out, if we were to get to 100 billion market cap, that could be like you buying a new car for three hours of work. You know, that's the way I'm kind of looking at it. I need to get some cash from somewhere and buy some more stock. But I don't know where. Actually, I would love to go back and double check this. Hopefully, maybe if someone else gets a chance to, but in PB's model, I'm curious to know where in the model the company currently gets to a roughly 100 billion market cap intrinsic value. I don't know if he does share. I don't know how much share price modeling he does. I think he does. I think he's I think he's done some price charting. I remember seeing at some point. Yeah, but that's the thing. I need to I need to look again, right? Because he's his net present value for, and again, like we love paperback. I don't want to criticize him, but I'm just trying to understand his. net present value is based off the 2032 numbers. But to me, like I'm looking out to like 2040, 2050. Yeah, it's just a lot of preference, right, though, how you model. Yeah, But I'm like, the point is though, the further you go out and then discount back, the higher your net present value. And this is also what then goes back to quality of revenue and predictability, consistency, and guidance, right? And this is why I think if you can bridge the gap between what the market is seeing. And what's the really, what's the long-term data suggest now at this point? It's not just what the company founders are saying. It's, what's the guidance of, excuse me, what's the guidance of, geez, sorry, started eating, yeah, started to start eating and made a mistake there, but. That's OK. So, if, exactly, if you were to feed the data points we have so far into a machine learning model, which I'm sure Ronnie Cape has done, he's on the call, where do you get to? Like, and now what's your kind of range of best estimates in, let's say, 2035? And what's your stock price range? I mean, it's got to be a good number, surely. Well, I just know there's a huge delta between here and there. Yeah. Thing is though, it's tricky because for me, I've got, certain financial needs, things that I need to pay for and buy in my personal life. So I'm like, at some point I have to cash some in because otherwise my wife's going to be, you know, she won't be happy. So enough of that. But like, where do you sell some? That's the other question. I think for me, it's like 180, 200 if we get there in like a year or so. Yeah. I mean, I think it also depends on how fast. Like if it gets there at the end of a two-year period, happy days, right? Still 180. But if it goes there in like, I don't know, somehow, some way, anytime sooner, like in the next year or something, would that change your mindset? Yeah, like if it's within a year, I'd sell a fair bit at 180. What would you reallocate to though? Tesla? No, I just pay off some debts. Like I've got a couple of mortgages and stuff. And I don't work as well. So that's the thing is like, it would be nice to completely de-risk my whole life and just say, if the whole world goes to hell in the handbasket, so to speak, I've paid off my mortgages, I'm all good, I'm set for life, no matter what happens with the rest of it, which is kind of where I think I'm going. But it depends on interest rates as well. Because if interest rates are zero, that massively changes your decision. Whereas right now in the UK, they're like 5.5%. Right, yeah. So we'll see. Do you think you'll sell anything, Neil, or are you just going to hold? Again, I think it depends on when and at what time, and do I have any other capital needs in my life? I personally think Lemonade is just one of those, it's one of those companies that can keep growing indefinitely in this weird sort of way where if the valuation goes up and then they raise capital and then they're able to offset the dilution with growth and then the valuation goes up and they're able to raise capital and they're able to offset that dilution with growth. You know what I mean? Like it's a question of how far can this dynamic play out where they're going to be in this position of strength. I think for as long as that Persists, it makes sense to hold it, as long as the shares don't really get detached from reality. Does that make sense? Yeah, but yeah, it does, but the other thing that has we've seen in other industries. is like if you get a really successful growth company, suddenly they're worth, a crazy number, then they just go ahead and buy a legacy player. Like we saw it with Netflix recently. They made this huge offer to buy Paramount. And who would have seen that coming 20 years ago? Like when Netflix was where Lemonade is today, you would not have said 20 years out, they're going to make $100 billion offer for a legacy film studio, but they did, right? So who's to say that 10 years time, Lemonade says, hey, what? We're quite like Progressive. We're going to acquire that. I could easily see that happening. And then you've, as I said earlier, you've got the platform and then you just migrate all of the customers from the legacy insurer. into your platform over time. You kind of bring them all across. It's like textbook merger and acquisition stuff. Yeah. You pick the best platform, bring everybody over, then you kind of sell off and get rid of the stuff you don't want. And then suddenly you've doubled the size of your business in two years. Yeah. My wish for the business would remain that it would be someone like Apple. Again, it's just somebody that has the distribution layer already there for something like a lemonade. I think they'll be able to actualize the technology the fastest that way. No, but I'm saying Lemonade acquires somebody. Oh, yeah. But do you really think they would ever do that just for their customer data sets? Like, do you think those customers and insurers have the data? Not the data they want. Not the data sets, but like one of our speakers mentioned earlier, like, what is the cost of acquiring a customer? Let's call it... Oh, like in that sense, yeah. Right. So let's say you could pick up 10 million customers for 50 billion. No, but I still don't. I still don't think it's the kind of customer they would want, because they have customers on their books that exhibit certain traits, I guess, almost like, if you will, from like a data perspective. Those are the cash flows they want to keep on their balance sheet. And it's that segmentation that really helps them, right? So unless you would sort of- Yeah, but you're going to have those same customers in other insurers. You're still going to have good customers and bad customers. Especially when you think about the size of the market. I'm just saying like Progressive, for example, categorically, they're going to be better at, they're going to have a better set of customers than the average insurer in the US. So it's going to be a higher quality customer anyway. And they've got some tech, which, you know, they probably wouldn't need, but it's still there. You just don't know, right? That's what I'm saying about like when we think about how does the game play out in 10, 15 years, there's loads of options. Yeah. Fundamentally, what they have gives them all that different optionality. Yeah. Well, it will be exciting and I hope that like there's a big group of us kind of like as we're all going to be OG investors and we'll just remember like who was around. It's going to be cool like to just see how things play out. I was sort of surprised to see in this space there's been about 30 people here, so I guess we can expect there will be at least about 30 people in Vegas, roughly.

Josh: Yeah.

Neil: Ballpark. Yeah, well, I'm looking forward to, I'm hoping to get to investor day if I can get a spot and so on. But it's difficult, obviously. It's quite a long way. Same for you, I guess. No, it's always good for me to go back to the US, so I'm stateside often. Yeah, OK. All right, guys, this has been great. I mean, it's the longest we've ever done. I guess there's a lot to catch up on. Wish you all the best. Yeah, nice to talk to you, Neil. Thanks everyone for joining. Take care, everybody. Bye-bye. Bye, everyone. Bye.