Lemonade, Inc. Q3 FY2021 Earnings Call

Good day and welcome to the Lemonade, Inc Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Yael Wissner-Levy. Please go ahead.

Good morning, and welcome to Lemonade's Third Quarter 2021 Earnings Call. My name is Yael Wissner-Levy, and I'm the VP Communications at Lemonade. Joining me today to discuss our results are Daniel Schreiber, Co-CEO and Co-Founder, Shai Wininger, Co-CEO and Co-Founder, and Tim Bixby, Chief Financial Officer. A letter to shareholders covering the Company's third quarter 2021 financial results is available on our Investor Relations website, investor.lemonade.com. Before we begin, I would like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our Form 10-K filed with the SEC on March 8th, 2021 and our other filings with the SEC. Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key operating metrics, including the definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. With that, I'll turn the call over to Daniel, who will begin with a few opening remarks. Daniel.

Good morning. I'd like to begin with very exciting news about our current product strategy. Lemonade's car was launched last week, and today as part of our continued investment in this line, we announced our acquisition of the tech-enabled conference company Metromile. We believe the deal will be a significant value unlock to our shareholders and our customers. And we expect this transaction to pay dividends in three important currencies. Firstly by collapsing time, we're acquiring billions of miles of highly textured driving data, advanced automatic technologies, and deep pricing knowledge. Metromile has implemented seasoned proprietary machine learning models that are informed by real world feedback and iteration at scale. It would candidly take us years to gather this level of insight. The deal also delivers over $100 million of seasoned in-force premium, 49 state licenses, and a team in every aspect of digital car insurance; all things that can accelerate the growth trajectory of our own car insurance business. Secondly, the deal allows us to flatten risk curves. Not only does the transaction accelerate our growth trajectory and knowledge base, but importantly, it allows us to vault over the riskiest parts of our core ambitions, namely growing Lemonade Car before our data models season. Lastly, this transaction delivers increased efficiencies. Post transaction close, our strategy is to build a business that preserves a single contrast, single-tech stock, single-brand, unified team, and a single-product experience. We believe this strategy yields considerable revenue and cost synergies that will enhance Lemonade's financial profile. Just days ago, we launched Lemonade's Car. This was a herculean effort by our team, the results of the current trends product built from scratch by the largest team we've assigned to a single product ever. We're incredibly proud of how it works out, and believe it's only going to get better from here. Injecting all the Metromile energy into Lemonade Car will lead to a product offering that stands alone in the market. Together we'll have the people and tools in place to deliver the market's most seamless and customer-centric car insurance product that is also its most affordable, precise, and fair. That is the plan. Concurrent with these significant developments in our core product and strategy, the rest of our book has happily sustained its growth trajectory. With healthy unit economics and robust customer demand, the overarching theme of 2021 sustained through Q3. We leaned in and sequentially ramped up our investment in growth. We saw robust premium growth in Q3 with IFP increasing by 84% year-on-year. In fact, in Q3, we drove a record $50 million net change in IFP. This marks the third consecutive record quarter and was a direct result of leaning in, a sequential increase in advertising investment for the period. Across our book of business, we are seeing trends that enhance our customer lifetime value. Most notably the increasing prevalence of bundling and the formation of healthy loss ratio trends in our business lines. This gives us confidence to accelerate our investment pace. Additionally, Q3 is typically the quarter where we see tailwinds driven largely by seasonality and renters moving behavior. We capitalized on this effectively delivering a record volume of gross new renters' business for the period. While rental growth remains healthy and consistent with our sustained strategy of diversifying our book, we actually drove faster year-on-year growth rates in each of our non-renters lines of business. As a result, the business mix evolution we highlighted in detail last quarter has sustained, with non-rental share of our overall book of business ticking up to 47% from 44% last quarter. And with that, let me hand over to Shai for more updates.

Thank you, Daniel. On the topic of growth and our advertising budget allocation strategy across the product portfolio, our growth investment dollars will continue to follow the areas of our business that demonstrate the most healthy unit economics. On last quarter's call, we touched on the formation of favorable trends in our European loss ratios. As a result, in the near-term, we expect to reallocate marketing dollars from our Life business to Europe. While our Europe and Life businesses each have relatively small scopes today, we continue to believe that they will achieve meaningful scale in the long-term. Beyond our customer acquisition strategy, we're observing positive trends in the growth contribution from our existing customer base. Bundling behavior is growing substantially across the book with bundles now representing 8% of total IFP compared to 0% prior to the launch of Pet in Q3 '20. This quarter, we recognized a record volume of cross sales at about $5 million and saw more than a fourfold increase in the number of customers with policies in multiple lines relative to last year. And while the average premium per customer in Q3 '21 was $254, our bundled customers show close to three times that number. Shifting gears to underwriting profitability across our product portfolio, our Q3 '21 gross loss ratio was 77%, up from 72% a year ago. I want to provide some color to address this trend. The increase in our loss ratio masks an important underlying trend. Our less mature lines of business are demonstrating meaningfully improved profitability. These gains are driven by a comprehensive strategy and rigorous focus across the organization to improve loss ratio and customer lifetime value. The improvements we're seeing put us on a clear path to our ultimate destination. In the long term, we expect the loss ratios of all Lemonade product lines to be under 75%. And with that, let me hand over to Tim for a bit more detail around our financial results. Tim.

Great. Thanks, Shai. I'll give a bit more color on our Q3 results as well as expectations for the fourth quarter and the full-year 2021, and then we'll take your questions. We had another strong quarter of growth driven by the addition of new customers, as well as the continued increase in premium per customer. In-force premium grew 84% in Q3 as compared to the prior year to $346.7 million. We believe this metric captures the full scope of our top-line growth before the impact of reinsurance, and regardless of the timing of customer acquisition during the quarter. Premium per customer increased 26% versus the prior year to $254. This increase was driven by a combination of increased value of policies over time, as well as a mix shift toward higher-value homeowner and pet policies. Roughly 80% of the growth in premium per customer in Q3 was driven by product mix shift, including cross-sales, while the remaining 20% was from increased coverage levels and pricing. Gross earned premium in Q3 increased 86% as compared to the prior year to $79.6 million, roughly in line with the increase in in-force premium. Our gross loss ratio was 77% for Q3, five points higher than 72% in Q3 2020, primarily driven by the impact of our rapidly growing new business lines, but was partially offset by considerable and notable 52-point year-over-year improvement in the loss ratio of our homeowners book. As Shai noted, it's important to understand the impact of mix shift on the overall loss ratio to get a better feel for the underlying improvements in loss ratio on a product level. Put more simply, each of our products is showing loss ratio improvements, though the overall loss ratio showed a slight uptick due to the shift in mix. Operating expenses, excluding loss and loss adjustment expenses, increased 98% in Q3 as compared to the prior year, primarily driven by a 90% increase in sales and marketing spending as a result of leaning into advertising investment. We also continue to add new Lemonade team members in all areas of the Company to support customer and premium growth and both current and future product launches; thus we saw increases in each of the other expense lines. Global headcount grew 111% versus the prior year to 969 with a greater growth rate in customer-facing departments and product development teams. Net loss was $66.4 million in Q3 as compared to the $30.9 million we reported in the third quarter of 2020, while our adjusted EBITDA loss was $51.3 million in Q3 as compared to $27.6 million in the third quarter of 2020. Our total cash, cash equivalents, and investments ended the quarter at roughly $1.1 billion, reflecting primarily the net proceeds from our January follow-on offering for approximately $640 million, partially offset by the use of cash for operations of $95 million since year-end 2020. With these goals and metrics in mind, I'll outline our specific financial expectations for the fourth quarter and updated full year of 2021. For the fourth quarter, we expect in-force premium at December 31 of between $380 million and $384 million, gross earned premium of $88 million to $89 million, revenue between $39 million and $40 million, and adjusted EBITDA loss of between $52 million and $50 million. We also expect stock-based compensation expense of approximately $19 million, and capital expenditures of approximately $3 million. This guidance would imply for the full year, in-force premium at December 31, up between $280 million and $284 million, gross earned premium between $291 million and $292 million, full-year revenue, between $126 and $127 million, and an adjusted EBITDA loss between $185 and $183 million. For the full year, it would imply stock-based compensation expense of approximately $50 million and capital expenditures of approximately $11 million. Notably, we've increased our investment pace and thus reduced the low end of our full-year EBITDA guidance range by about $13 million. There are two drivers here: primarily, conservatism related to marketing efficiency, and accelerated spending in support of the launch of Lemonade Car. To allow our teams sufficient time to learn and ramp up prior to servicing customers, we've staffed up and continue to staff up all of our customer-facing teams prior to launch. In prior iterations of our forecast, these costs were slated for 2020, closer to the onboarding of car customers. We've pulled forward a portion of that planned spending into 2021. With that, I would like to turn the call back over to Daniel. Daniel.

Thanks Tim. As is our custom, we are happy to address investor questions that were entered and uploaded on the same platform and I will turn to some of these right now. The first question comes from Jacob. And Jacob asks, will Lemonade adopt the pay-per-mile business model that Metromile is using and which it is failing at? Jacob, I don't want to disclose here specifics about future iterations of the Lemonade Car product. We tend not to preannounce exact features or timelines, but I do want to give some context and color and talk about some of the underlying elements of your question. I think the important thing, which I'll return to in a few minutes' time as well, is to distinguish between pricing based on proxies and pricing based on precision. One of the fundamental drivers of how Lemonade thinks about car insurance and how Metromile thinks about car insurance is to increasingly underweight proxies such as credit score and gender, marital status, and job history, all things that incumbents rely on exclusively, or nearly exclusively, in pricing and underwriting and to instead use data streams which give precise information about how much is driven, how well those miles are being driven, and to use those to make decisions instead of relying on proxies. As I say, Lemonade Car has been architected that way based on telematics and on a data feed. The Metromile acquisition for us really jumped that capability forward in very significant ways. What it gives is a world-beating understanding of expected losses per mile driven. So what Metromile has spent the better part of a decade doing and has garnered billions of miles of driving data in support of is getting pinpoint data on every mile driven and the risks associated with all elements of the driving. That allows us, as I say, to predict losses per mile driven at a level of granularity and precision that proxies can never get to. Once you have that understanding and you comprehend the true expected costs per mile driven, how you package that to consumers is an important but secondary question. You can present it in different ways. You can present it as Metromile themselves have done on a pay-per-mile basis, or you can package it as Lemonade Car does today, where you get a flat rate per month, but that can change based on your driving patterns. So we will experiment and bring to market different capabilities over time. We are customer-centric. We'll use what customers want as our guiding principle and how we package. But as I say, the fundamental distinction to draw is between precision pricing and proxy-based pricing. We're very much going to lean into the precision side of the house. Let me take another question from an investor. And the question is, are you in talks with automakers to form a partnership? Tesla dated Lemonade's delightful customer experience equal the best of both worlds. Thanks for that question. As I just said to Jacob in a slightly different context, I don't want to reveal what is or isn't in the works at the moment. I will draw your attention to the fact that Metromile has made announcements about various collaborations with OEMs. But again, I'd like to address the fundamentals of your question. Undoubtedly, the trend worldwide is towards connected cars. Metromile has been implementing an OBD device, a device that plugs into the car's engine computer and adds to it augmented with GPS, accelerometer, and GSM chip, allowing it to really become a connected car. All of Metromile's customers are effectively driving connected cars already today. Our own app that launched last week for Lemonade Car does something similar, but it's really connected to the driver rather than the car, using the smartphone rather than the onboard device. We take an approach that is largely agnostic to the data source, whether the data is coming from the OEM through a connected car, or through an OBD device, Metromile, or through the smartphone as is the case with Lemonade Car. We'll be able to integrate all the different data sources, so we're not committed to any one. What we are committed to is using that data to generate ever more precise expected losses per mile driven. With the acquisition of Metromile, we will be able to do that in a way that just a couple of days ago was impossible for us, giving us multiple sources and multiple years of turning that data and really understanding it deeply. Now, I'd like to lay out one other dimension on this now. Again, coming back to this distinction between proxies and precision pricing. The basic capability that I discussed using data streams to attain precision pricing is fundamentally available to everybody. They are becoming more and more accessible through connected cars; OBD devices have existed for a while; smartphone tracking capabilities are also technologies that have been developed and deployed in the past. Yet we don't see them adopted in a meaningful way by the car insurance industry. I think that the fundamental obstacle ahead, the thing that's slowing down adoption, is really a classic innovator's dilemma. At the most recent Berkshire Hathaway Annual General Meeting, the leadership of Berkshire, the owners of GEICO, said the following: they said that GEICO clearly missed the bus when it came to telematics. I do ask myself, why would a company as venerable and sophisticated as GEICO entirely miss the bus, in the words of its own leadership? Why is it that of the 210 million car insurance policies in effect in the U.S., more than 95% do not use telematics? Why is it that the 4% or so that do use telematics are already using a neutered version of it? They only allow it to run for about two weeks before discontinuing it, and whatever signal they pick up during that time is meaningfully underweighted. They do not rely on them as heavily as companies like Lemonade or Metromile do. They do not pass on the anticipated savings to customers at anything like a rate commensurate with the expected loss. I think the answer to that is that ignorance is bliss. If I were running a legacy company with tens of billions of dollars invested in proxy-based pricing, I might well do the same thing. I think it's a rational thing to do because what happens when you move from proxy-based pricing to precision-based pricing is that you discover that large groups that you are treating as monolithic are actually made up of very different risks. About two-thirds of drivers drive less than average. If you were to know that and if you could differentiate your customers, you'd likely have to lower rates for about two-thirds of your book by as much as 30 or 40%. That would be a devastating hit to a legacy business. Consequently, the other third would be subsidized, and having lost that subsidy, you would have to raise rates for about a third of the book, which would lead to tremendous churn. All-in-all, adopting new technology is not good news in the short-term for people in the business of protecting a legacy business. But that is also the opportunity of Lemonade and Lemonade Car, now enjoying a tremendous boost through the acquisition of Metromile, to lean into the technology-based fundamentals of precision pricing and pass on those savings in a way that creates a sustainable, indeed structural advantage relative to incumbents. The final question I want to address comes from an investor who asked the following: Why should I, as an investor, continue to hold onto Lemonade stock when the Company is not expected to turn positive cash flow for many years to come? We appreciate that question. I also appreciate your faith in being a shareholder to date. I want to concede and say that at the moment, we're not of the view that Lemonade, as a stock, is necessarily right for every investor. In fact, Shai and I have always placed a premium on being aligned with our shareholders, being transparent about how we intend to run the business and seeking shareholders who see value in that particular way of prioritizing. To that end, we wrote a founder's letter made it into our S1. It's also available on the homepage of our Investor website, investor.lemonade.com. I encourage you to read it. I’m just going to quote a couple of sections briefly. The first one is: we say the following, Lemonade is not everyone's cup of tea, which is why we wanted to outline our approach and hope that investors who share our thinking will be drawn to Lemonade, while those who do not, will seek their fortunes elsewhere. So just acknowledging that the way we're running the business is right for some investors but not for all. For those to whom it is right, I think, are the ones who are really looking at the long term rather than the near term. We write, "Industries like insurance are reinvented once every few centuries. Optimizing for profitability is important, but can wait. We aim to grow fast and capture as much market share, mind share, and larger geographical footprint as possible. If we were to address that, we would have to finely hone the business but would risk losing the market." This does not mean our bottom line does not guide or constrain us; it really should and does. We do not launch products, open territories, or policies we believe will be a long-term drain rather than a long-term gain, but the key phrase is long-term. Coming back, I want to give you a little bit more context. Since we wrote these words, 16 months ago, we had our IPO, and in the intervening 16 months, our in-force premium has grown by over 160%. Our gross profit has grown by over 180%. We have moved from being a monoline business, doing only homeowners insurance, to one that also does pet insurance, life insurance, car insurance, and as of a recent announcement has acquired Metromile. The bottom line is we think of the industry we're in, insurance, as the largest disruptable industry on the planet. We believe that this is a huge prize that's worth fighting for, and there will be disproportionate rewards for whoever attains a positional or first position as we go through the next few years. While we could be profitable today, all our products, all our campaigns, and all our geographies have positive LTV to CAC. It would be at the expense of great fortunes down the road. These are the years for growing customers, growing products, growing markets, and growing top-line, which translates into sizable investments that put us cash flow negative. Coming full circle back to your question, why should you hold the stock despite negative cash flow? The answer is, well, it depends obviously on you. But if you believe in our vision, if you believe as we do that there is unlimited opportunity and a limited window of opportunity, and if you believe that the moves we're making and the investments we're undertaking have a good chance of yielding outsized returns, then that would provide an answer to the fundamental question of why hold onto Lemonade. I hope that was helpful. With that, let me hand the call back to the operator so we can take some questions from our friends on the street. Thank you.

We will now begin the question-and-answer session. The first question comes from Michael Philips with Morgan Stanley. Please go ahead.

Hey, good morning, guys, and congrats on all the news from what's new. Good stuff. I guess, first question would be on your comments in the letter about leaning in in the quarter. We know that seasonality and you talk about that a lot of third quarters mean certain things for wanting to maybe ramp up marketing spend. But excluding that impact or phenomenon, what else led you to see that this was a time to lean in besides the normal seasonality?

Hey, Mike. Thanks. I would think of giving an overarching theme. If you scan back over the 5 or 6 quarters since we've been public, there's a trend that stands out. A greater level of confidence has led us to increase investment levels and accelerate plans. In a couple of instances, we saw the opposite; early days, early months of the pandemic, we saw a great lack of confidence, and we dialed back and were quite cautious. That was a very brief period; for the most part, these quarters have been the former, increasing confidence, a better ability to get products in the hands of customers, more assurance in our competitive position. When we see that, it gives us more confidence to accelerate and advance. This usually comes, and exhibits itself in a P&L dynamic, where we spend a little bit more – the bottom line shows that impact in the short-term but the LTV, the CAC remains strong. The market position remains strong, and the pending combination with Metromile gave us that confidence and more in what is arguably our most important product launch, certainly our largest addressable market. So you see that reflected both in the Q4 numbers, and I think you should also feel it in our posture as we head into next year.

Tim, maybe I should be a little more specific to the question. I guess, you leaned in also at a time when you admitted, as well as the industry, that there's higher customer acquisition costs and higher marketing spend costs. I guess I want to know whether that was at the right time and how you view those increased marketing spend dollars that are maybe here to stay for a while or how long do you see this lasting?

I would think of it maybe less as a tougher time, but perhaps a little more expensive time to acquire customers. There is a case to be made where if customer acquisition costs increase, that feels bad in the short-term, but if the lifetime value potential is strong and increasing, that's an impact that affects everybody in the market. It's not just more challenging for us or more expensive for us; it's a market-wide phenomenon. So we choose to lean into that knowing what the return is on those investments. We're a bit conservative in the forward period. We've seen this now for a long period, but we don't have enough data to say this is persistent in the last few years. We're a little cautious about the coming quarter. You see that reflected in the numbers. In terms of seasonality, I think in the first part of your question, that's still there, but it's a nominal impact. It's softening somewhat because of our much more diverse product base. We still see that in Q3, but it's been less of a factor, really our choice to spend more to acquire more customers, as well as to accelerate some of the hiring plans to support the expanding car launch.

Okay. That makes sense. You guys are pretty exact with your wording. So I might be slicing the news too finely here, but if I look at the current letter and your long-term target, loss ratio less than 75%. I think prior, you had said something a little different, and again, I might be just slicing it here, so I want to make sure I'm not. Prior comments there, we were in the low 70s, 70 to 75, and today it was less than 75. So is there a change there that's perhaps making you maybe? – I think that should be a little bit higher than what it was before, or again, I might just be reading too much into that?

No real change there. I would think of it as our long-term target remaining unchanged. As you may recall, we have a business model structure where we take a 25% flat fee, and the remaining 75% goes to reinsurance and customer claims and expenses. That's unchanged; our long-term target is still there. In the short-term, it's important to note that while the loss ratio did tick up a little in aggregate, each of the product lines has shown some nice improvements, and it's really a mix shift that is accelerating. We're a little ahead of where we thought it might be a year ago, and that’s a good thing. Less than half of our business today is made up of our renter's book, and that's decreasing, which means the other parts are increasing and that reflects the market. Homeowners is a very large market, life is bigger than that, and car is something like three times the homeowners market. You’re seeing our book of business and loss ratio shifting to look more like the market each quarter.

Okay. Thanks. Last one for me, and I'll just ask one on Metromile and then save all that for later, I guess. One is obviously lots of comments about the incumbents today on the preciseness of the data and what that's going to mean for your pricing and customer acquisition, everything else in your margins. Can you comment on how confident you are today with the pricing, technological advances of Metromile, given where their underwriting margins have been, loss and loss adjustment expense ratio have been? Does that make you confident with their current price and algorithms and data they're collecting, or do you have any concerns there at all, or things that might need to be tweaked or fixed?

Hey Mike. Our confidence is very high. This is really what we've spent the last while diligencing. There's no question there has been an uptick in severity across the auto insurance space. This has affected Metromile and affected anybody else. Progressive and others have spoken about this at length, and I think the industry will take rates to reflect the increase in the cost of repairs in the last few months. So there's definitely a near-term impact that has affected them. But we look right through that. What we're looking through has really nothing to do with the near-term loss ratio of Metromile. It's really about the fundamental capabilities and strategic strengths. We believe there is a pronounced advantage that is readily visible. A couple of things we mentioned in the last half: for one, customers report savings, something like 47% when switching to Metromile. And at the same time, the loss ratio is within 10 points of Progressive’s direct business, suggesting that even if they took a rate increase, there would still be significant savings for consumers even as a loss ratio hits its long-term targets. So we feel a structural advantage in the capability they have built. I’m moved by the near-term changes they tend to make anyway in order to bring the loss ratio in line with our long-term targets.

Okay, guys. Thanks very much for your questions.

Thank you.

The next question comes from Tracy Ben Gig-E with Barclays. Please go ahead.

Thank you. Good morning. Just a follow-up on this past discussion just on growth, which is outpacing marketplace conditions that doesn't always turn out well. I think Metromile has 49 state licenses, but operates in eight states now with plans to enter five more next year. Does that cadence change in your view?

I think Lemonade in general has been characterized by more emphasis on growth. Certainly, if you look at our rollout of our prior products and compare them to Metromile, we do lean in more aggressively in that regard. So I do anticipate that with or without Metromile, we would have been looking for a rapid deployment across the U.S. And we've seen Metromile as an accelerant for that.

Okay. Got it. I also believe that Metromile had their reinsurance program. Is the idea that you would have buy-in on the new program that's starting in January?

During this period between sign and close, as you know, we're separate, independent companies sort of managing our own businesses while looking ahead to all of the approvals coming together and the companies merging. You're correct that they've chosen to go without reinsurance at the moment. But I think like Lemonade, they're thoughtfully assessing the market, would be my guess, and my understanding to see what kind of terms are out there and what's available. We made the choice actually last summer and the year prior to go with terms that we found very attractive, although we could have gone without reinsurance. I think Metromile had those options and they'll make those choices. Once the companies come together, we'll likely continue to enjoy the structure we have in place, which gives us lots of flexibility. We expect a nice capital surplus benefit from the combination of the Companies, perhaps something in the order of 30% or more. The exact number will have to be determined, but typically when you bring companies together in this way, it can have a benefit from a surplus view as well. There are two or three areas in this from a perspective of reinsurance, capital surplus, and other regulatory benefits that make us a great combination.

I need just a follow-up there because you mentioned surplus. Typically what we see is that an auto insurance rider could run at a higher premium to the surplus. Does that change your equation at all in your deal?

It's a little premature for us to get too specific about what those benefits will be, but yes. We're well aware of the incremental costs of car versus the other product lines, but I would recommend maybe staying tuned as we get closer to closure. We'll give a little more clarity on some of the more specific benefits.

The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Thanks. Just first on Metromile, you alluded maybe Metromile wasn't charging it up. Besides bundling, which you can clearly bring to the table, maybe if you want to talk about how you would run Metromile differently as part of Lemonade? And then just second, as you expand to Europe, just are there broader financial implications we should think about?