Both Lemonade and Nextdoor are companies that were once seen as far from achieving profitability. However, recent developments suggest that both companies may reach positive cash flow sooner than expected.
Lemonade, an insurance disruptor, has been growing rapidly since its IPO. The company now has 2.1 million customers and has seen significant growth in its premium numbers. In the first quarter of 2024, Lemonade’s gross earned premium grew by 22%, and its retention rate improved by 100 basis points. More importantly, Lemonade’s loss ratio has decreased significantly, approaching management’s target. The company’s adjusted EBITDA loss has also narrowed, and it expects to achieve cash flow breakeven by the end of this year.
Nextdoor, a neighborhood social media platform, has also shown promising signs of profitability. The company’s new CEO, Nirav Tolia, is focused on responsible capital allocation and running an efficient business. While the company’s growth numbers are not groundbreaking, its adjusted EBITDA loss has decreased by 36%, and margins are improving. Nextdoor anticipates being free cash flow positive by the fourth quarter of 2024, a year earlier than previously expected.
Both Lemonade and Nextdoor are currently undervalued in the market despite having substantial cash reserves. With their focus on efficiency and strong balance sheets, these companies have the potential to achieve their profitability targets. It may be a good time for investors to consider taking a closer look at these opportunities.