After regular trading hours on Monday, Lemonade (LMND -1.49%) released its first-quarter results. The company beat on both the top and bottom lines and showed encouraging success in bundling policies.
In so doing, the next-gen insurer nearly reversed the almost 13% decline its shares suffered during the regular trading day. Yet the stock still declined, if only marginally, in trading after the close. Let's see if we can tease out why.
A bundle of growth
Lemonade's revenue for the quarter totaled $44.3 million, which was a robust 89% higher than in the same period a year ago. That was due largely to the tally for in-force premiums (i.e., premiums from active policies), which enjoyed a 66% increase to $419 million.
The company attributed this to a 37% increase in the number of customers, to over 1.5 million, combined with premium increases (which, on average, were 22% per client).
On the bottom line, Lemonade's net loss was $74.8 million ($1.21 per share). That was notably deeper than the $49.0 million deficit in the year-ago quarter.
Regardless, it was better than analysts were expecting. On average, prognosticators following the stock were modeling a net loss of $1.43 per share. Lemonade also beat on revenue, slightly topping the collective $43.4 million forecast.
This was a historic period for the company. It was the first full quarter in which all of its lines were available in a certain market (actually, two in this case: Illinois and Tennessee).
"The early data are encouraging," Lemonade wrote in a shareholder letter. "After only one complete quarter, we saw 40% higher bundle rates in Illinois versus the rest of the Lemonade market in the U.S. The average dual-product-customer outspent the average single-product-customers 3:1, for triple-product-customers the ratio was 7:1, while for customers with all four products it was 9:1."
The pack stays back
At the risk of stating the obvious, insurers love bundling policies because this activity adds to total premiums and helps retain customers. See, even though it's a tech-forward company, at the end of the day Lemonade basically sells the same kinds of policies as many other insurers.
The after-hours reaction by investors was muted at best. That's probably because fintech stocks have had a slog of it lately, on the back of concerns about the Federal Reserve's recent moves.
The Fed's relatively large interest rate increase and its goal of whittling down its $9 trillion balance sheet have thrown financial markets into disarray; investors are being cautious about the sector's stocks in no small part because of this.
Could Lemonade's encouraging quarterly results vault it ahead of the fintech pack, which includes other relative newcomers, such as Upstart Holdings, that some investors like to lump it in with?
While I think the company's first-quarter performance was good and it's developing its business well, I don't believe the results were good enough to separate it from other next-generation finance stocks. I think sentiment will need to improve as a whole before Lemonade's share price heads meaningfully higher.