TRUP - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the Trupanion Second Quarter 2018 Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Laura Bainbridge. Please go ahead.

Laura Bainbridge

to Second welcome Results XXXX and Call. Conference afternoon, the Quarter Trupanion Financial Good call Rawlings, are and today's on Participating Darryl Chief Officer. Tricia Chief Financial Plouf, Officer; Executive

are most recent statements contains Today's materially during and like Before I known differ Commission. filed provision our Litigation website, regarding management uses Trupanion the actual noted, the Unless and non-GAAP and our Forms as and margin, is basis, included and to acquisition. adjusted expense make Trupanion's to within directly today's opportunities Earnings discussed. stock-based comparable are statements can under to Relations conference in release Reform that of discussion for XXXX. operations, today's new XX-K without performance we in free These it to press cost, cash income financial most our be GAAP. or measures of remind that to will otherwise certain we refer financial including, Quarterly use and forward-looking operating well non-GAAP accordance excludes earnings call, operating as prepared to and cause compensation of financial These depreciation would on margins everyone or the Investor these of presentation be non-GAAP tab. Relations financial Securities which flow. the variable fixed can intended Securities limitation, detailed begin, adjusted the on measures expenses, measures future reconciliations Act and reports margin, from the Investors review measures will operating results, and found Investor we of release, evaluate with risks non-GAAP with degree GAAP performance performance, on found that uncertainties the expenses, X-K on risks Private on of When the the these Exchange are which involve of not safe acquisition those income a in website results expenses pet references high expense. the non-GAAP the other uncertainties addition income, substitute harbor to EBITDA U.S. and could encouraged and unknown presented company's a which of term to a to A in adjusted meaning before the company's be

available call call webcast I Lastly, Relations Darryl. today's website. is to with Trupanion's the I'll hand that, on the via be And on everyone would like available A Investor remind that site. also will also to replay over

Darryl Rawlings

in Thanks, our Laura, everyone. hosted This pet available Trupanion. for should us few Meeting new been and Since our and Annual last at includes cost, our therefore, frictional invest the fixed our quarterly lower to both with equity spending which our Pet remarks It's good months second and growth in expenses, and acquisition. fourth cover business core I'll XX% prior-year the our in events the veterinarian first, both within subscription revenue briefly perform recap over highlights to period, reflecting segment. the grew today. my our quarter. channel acquisition targeted financing Shareholder busy a completed in an I'll But continues line call, we increase Total of financing. afternoon, IRR. solid funds other

million $X.X quarter, XX,XXX acquire spent to pets. we the During roughly new subscription

about veterinary to directly the value force and I pay of our which often modes talk modes, the time proposition, advance our our ability to our continued around our territory of clinics our sales data, proprietary include also at partners, checkout. We business.

because equally they not phone. I easily as because but Another they mode frequently is to our important, the translated topics, people and less not speak are aren't over culture. these

of centered to conversations. all of strong unparalleled is feedback event, prospective year's and Trupanion, a able June on We Meeting Xth to encourage Annual helps to events all here to look June Shareholder intend We team provide to meeting. investor can part at forward wide emphasize positive. the XXXX. shareholders the planning, a year Annual have next and Annual event assist Shareholder us our and in building we are the XXXX. shareholders event know reason you on participation all that for ahead. group Meeting in formal large Attendance X, It X, of great to And of to productivity us. the Since less At our Shareholder Trupanion attending this and we the at We join we ensure this our overwhelmingly both on was we team person. hold was this years access open at Meeting momentum your Xth a members Q&A, Q&A hope is to get around

the opportunity Shareholder update a Annual initiatives. highlights the we five During on strategic an provide to Meeting, of I'll review had also today. the key few our

partner sales, continue we a implement Trupanion improved with and we to when clinic see First, Express. same-store veterinary

we we our the in are Second, seeing conversion rates. discuss improvements overall

to Third, regional our achieve able territory highlight we to Nirvana. first were

the for utility to past matter seconds granted our versus in a by able the highlighting Trupanion paying the claims through lot in our in now Claims we is have pets territories. execution, It Express map improves road more Fourth, dramatically take invoices level at minutes. long quarter. but friend were It automation, our equals As Trupanion rate. a other of of which worth quarter. believe goal is went patent have refer of Trupanion Nirvana Nirvana that was Express a we achieving to a monthly customer regional will our a or a reminder, in add automation we time experience also and to demonstrate existing that churn members a live

able With the rest to of the veterinary the approach provide while possible. best operating of Trupanion the the way enabling model, on a to reimbursement care, changing are industry pet owners care is cost veterinarians

In profits pets. existing A is which June, generate XX% cash to we our in adjusted acquire office our our to reviewed is income margin, invest both we our home to office cost. to our more us in through elimination us return our reduce our XXXX, accelerate members, we these we rent more Lastly, in expense giving to of tactic home our fixed to adjusted of the provides Owning expenses operating of from Seattle. fictional our made enroll collection the rental expenses the decrease reinvesting long-term key exercised margin option the flexibility our value target fixed before expansion progress our growth. operating to to or expanding members ability of or and building

through should entities up additional funds use XX% our invest in freeing agreement assets strategic regulatory received frictional we second hand well our long-term dilution we handful might the to an our do capital in with the and of raising concentrated shareholder and of to with purchase cap asset making. upfront help walk costs, a opportunity in the we the in that our detail. up financial This I our consider building to And highly I stated letter, were the through the investment are and We for quarter a approval funded years Additionally, pay table in accepting follow-on able strengthen In sit building so. to on Trish for offering, aligned to investors, would and to we Through order we sheet see an lower was results that, that, other to our XXXX with call strategy. our growth of offering. know insurance believe greater to initiatives. over who balance us

Tricia Plouf

XX% of XXX,XXX enrolled our revenue up increased Trupanion, approximately subscription per and average year-over-year. second XX% an pets XXth. and reflecting quarter continuing over last increase upgrades with was was forecasted for year-over-year good year-over-year, of line $XX.X XX.XX% X% the XX.XX%, everyone. a here June approximately Thanks, average million, Monthly other busy made increased that quarter and both and Average X%. up $XX.X pet from It period Darryl, system revenue were enrolled process XX% pets in Total results at X% $XX.XX, quarter enrolled was retention to afternoon, pets as the year. year-over-year Total historical reflecting of was we Subscription was the and of than improvements stronger up monthly XX% from solid. in prior-year to our slightly period segments. prior-year our Revenue million XXX,XXX. to in subscription business pets financial

Our end. million for and last is was quarter in $X.X component, revenue, enrolled comprised quarter, XX% quarter, now the that generally gross of the year-over-year which expect other roll-off higher of XX,XXX the our pets and a has segment we other XX%. this with quarter of increase growth this XX% discussed annual the segment forecasted XX% approximately totaled at was quarter, revenue than We Total business the of BXB margin in our year-over-year. our full the growth to was of was business revenue the XX% margin between an be of that first Total slightly quarter we gross year segment was rate target in group pets in year-over-year. to slower-than-anticipated. XX% Similar XX%. line to for Subscription

revenue, from departments. X% in Second quarter and our fixed down continued prior-year reflecting period, administrative X% general represented in increased expenses of and total technology the scale

to million our Our these the pet in lower provide initiatives. home The purchase flexibility lease office estimate scale. expenses acquisitions, fixed $X scale fixed per to and operational expected to invest to $X and growth income. when to of of departments expenses million financial rental additional remains are other acquisition representing reduce X% year at long-term and savings is by will We revenue, our target us we

Turning to spend. our pet acquisition

subscription to million the ratio and the XX,XXX we to of in pets. new in quarter. our prior mentioned, acquire internal quarter second spent spent X acquire heading into to Darryl the LVP-to-PAC quarter, in quarter X in to we compared compared the target This to an prior-year in X.X X.X than pets, to $X.X As XX,XXX year the higher period million resulted $X.X which

operate our a and totaled important pet These spending we of During quarter, are million $X.X our with was we growth positive free XX% aggressive in which operating our acquisition and future key to long-term spend. cash the up period. targeted years our tests within on guardrails part as income our the to initially IRR the less Adjusted second prior-year were strategy. intended quarter, in flow continue test from being achieving initiative remain than of we

to year-over-year revenue, reflecting quarter, lower our points than XX of XX%. As margin our approximately for Express This adjusted a of basis the Trupanion target slightly percentage prioritization was improvement expanded installation. operating

included $XX million and which included underwriting third offering estimated basic a and of to to $X.X we short-term earnest per flow XXXX. quarter, had $X.X for from Free EBITDA net year related million million building money compared loss to million $X of negative which the quarter primary June long-term cash This common of excluding we our purchase. flow Including the and for quarter. Adjusted million or deposit, $XX.X $X.X of quarter proceeds $X.X cash deposit in second the This shares have in negative follow-on of the been cash had EBITDA cash, cash XXXX, period. million, discounts, of equivalents million $X.X proceeds approximately XX, quarter outlook $X.X other operating million to a the June of million operating commissions the of prior-year I'll from loss stock offering. flow $X.X we money the free $X.X million price and an the earnest offering million diluted includes cash cash would adjusted of for compares now share. expenses, During $X flow turn million, At debt. the flow full of in $XXX.X investments million. $XX.X After of $X.X free was our was at of netted XX. and on

revenue million For range we year-over-year are the $XX to midpoint. third $XX of quarter XXXX, at of representing million, growth forecasting the XX% in the

increasing For to business first the our in the year the segment. our of reflect full visibility our guidance overperformance range into are we year, half and other better revenue

keep our a million XX% fluctuations at As revenue in be the to million, to Please mind for the subject U.S. revenue are $XXX the representing rate result, we in currencies. conversion range $XXX to growth that of the full year year-over-year and Canadian now between expect projections midpoint.

time in call our the third our rate to Darryl. quarter was you for conversion which turn your and now year today. I For guidance, at And the approximate June. over used Thank will rate full we end back projections, of the a XX%

Darryl Rawlings

Thanks, Trish.

highlight the Growth Trupanion, mention to Operator? Conference Before many updated we up we'll With upcoming that, to want and questions, is to Canaccord at that moment for on moment hope up for open transparency, a a I questions. we our next Boston, available take Genuity you updates Q&A, which see recently We we IR you value in these we've open take our to also the I'll hope website. helpful. our call participation find investor-focused of there. week. At

Operator

Instructions]. [Operator

question comes Lake first Street Our with from Markets. Mark Capital Argento

Mark Argento

talk to, like you in that new quarter in then market? able mentioned what wanted the some you to X.X sounded a you were What you know saw aggressive aggressive? looking the think little LVP-to-PAC versus little tests. Just with Could it playing about Last be be out forward, of see that you out? quarter, X.X. And the I ratio do I to bit how there you very less led

Tricia Plouf

a a we just have be acquisition into saw thought Trupanion year the compression having Express quarter our here roll-offs adjusted of we start margin to the pet our main and of flow also and that I'll of The and Mark, guardrails because as positive. bit, quarter that accelerated by driven of we operating the that spend we operating a is was saw Darryl on adjusted really went bit little and we cash want constraint bit within to margin thought we Sure. as margin. last can we And amount bit pressure add. -- a -- last

to about were we I'll those about long-term. so how a and to broader quarter factor into reasons, And we achieve opposed let cautious just this the going talk market Darryl targets. financial those for think as

Darryl Rawlings

$X.X operating Just prior million to up adjusted our $X.X year. was was recap, million, the in income from which

but income, previously we little are was operating long-term going anticipated. than a adjusted quarter thought the we our about into the it as planning, expanding we So tighter had

X.X, that a single just in have to pet, XX% tentative. are we at So range But XX% driven we ratio a the XX%. little that's targets the is above to bit average and LVP-to-PAC for IRR the and by that's be

at for something the to looking equal. closer year X.X or probably total being for And year so else we'll the be X.X all

Mark Argento

sense just touch what And exactly just a Okay. a -- what helpful. maybe you describing? but trying were that then is you That's to follow Darryl, on in Nirvana, there, nirvana

Darryl Rawlings

it it's monthly own So when is a -- and is, goal, I revenue get dealing internal metric into larger my company, language about talk letters, or and a lot shareholder you our about a a which recurring which in larger you're with not coming doing but churn that -- on And in the our by from leads new numbers, are to from offset churn we'd existing us needs outbound leads, from case that to like be new board. see pets members. new being offset, our

adding to gut the So point were if a and pets at that our where we could of either our the can be of category. kind get all growing spend that level PAC friends members means into of churning, same telling existing pets in

ever remarks, I target. there, in certainly get help now. what we grow letters opening is years you There that can us so my my is kind is of this shareholder XX and to will we more describe ambitious from a stuff And as get up-to-date. what And long-term Nirvana. If XX very about is a in talked that

focused it. We're And regions on on And it. had one been recently our so achieve of focused constantly we that. we've

the history, first So where that occurred the in has time now. company's it's

until We up happens et cetera. all hopefully, that a improved gives building little have brand it's map. value bit long great everywhere, experience, And road us ways proposition, customer of awareness, around that a having but

Operator

with Graham Canaccord Michael from comes question next Our Genuity.

Michael Graham

Congrats quarter. on a good

could expectation year. peak in above QX expansion is digits comment have embedded that quarters. sort comment Is it's been for on that, on QX few can wondered X% kind the of that been just the guidance? I guidance? in kind going Just -- Or saw to I range of we beyond? in And rates coming in the if that's of single to last that continue the low just growth coming the in come the an the to just mean, something that? on in there -- and you metric last you ARPP year-over-year in

Tricia Plouf

Michael. the saw change average. we X% last would in our Sure, year right, X% that year-over-year and is you're than what higher I say Yes, XX-year

we And a as I was on for said, consider are has than it that how Our the some Trupanion by increases subcategories being just larger all XX-year takes we -- updating driven and be range. year would to about X%. out where what reminder, subcategories a a to X% been were to mispriced. we are based more rolling It's more having average us really lot pricing That Express, equal be in we normal things be should X% book. that the through need estimate our that currently And roll on. we to it in rolling

now, we year, more we range the roll the that where a at think remainder have anticipate year. will a from seeing change of are next for I start don't but around the right impact will X% so an of on that And seeing and we

Darryl Rawlings

of it. Yes, kind of I'd just reinforce one part

a the file, for time out pet walk paying a have clinic, to nuisance the all before invoices invoices, door, of are a you that years, XX we just increased last veterinary Express, by is years, we're we're because XX of that we them. cost categories $XXX sometimes and XX backwards to care. much directly Express, X% we lots forgotten, is with the and too they're XX X% invoices a we of pet or is by If reimbursement cost And higher what slightly rolling we and they look $XXX are over the model, in see look because or Trupanion and a in out to where of smaller were model breeds to next owner you owner Trupanion doing at When geographies. pay cost-plus remember, a

of maybe versus in typical the So X% be change the X%. X% expanding the to we're range should X% while to Express, Trupanion year-over-year the use

Michael Graham

us markets if update I what's could just into to it's ask bit and one examples how going wanted on of you've is, other a marketing that little direct-to-consumer the where then, been efforts? Maybe leading you with your on just any going? And

Darryl Rawlings

about than Yes, well, have anticipated. we we LVP-to-PAC in would comments, our a ratio talked what higher otherwise being previous at

quarter, last the of in on tentative. We kind So little a bit BXC. lot held were were a doing we of We back that.

BXC in is are go have people more would learned clinics if of that But and as We're we active very Express, with support where and of the higher. way benefit veterinarians, underlying we BXC BXC brand reiterate, we've Express. reinforcing is rates really where Trupanion a our us yet is QX, of and conversion active what see the from areas the effective. we is markets not will is lot low participation to things from and its BXC of -- market You Trupanion there that a or partnering In in on increasing it need expect. new and QX, clinics in are we of own with

Operator

King. Our next from David question CL with comes Westenberg

David Westenberg

a on quarter. good very Congrats

lot competitive So a of are in we talking is are do the invoices insurance question about, from directly. getting clinic lot companies we a a investors how

you of what are they specifically, the differences but doing, does? competitors explain really your what that say do? of don't Trupanion And can So kind

Darryl Rawlings

Yes.

some And are to company, leave. it, help deductible into X-week to their and only we send to then back invoice. and mentioned around pet and so So which in coinsurance, the X-to utility to patent for dealing the pet fill waiting so a of we're then a pet and a minutes, owner What integrating practice a within historically seconds out -- typically then had place comes most pay where pocket been about, go pays with would The pays that the they and the with small management try competitors received invoice they utility software automation is the in they an is, time owner is the balance expedite claims period opening or sometimes by for our a before signatures paperwork, check. what then, within had would owner a has with veterinarian at ability invoice having a out the and being the for the it an in recently. wait would mailbox pay remarks of if to we technology created patent

customer talking versus reimbursement you're scenario, the is So paying a where be upfront pay pet and seconds the or directly dramatically experience hospitals We that desire in things an promoter is we think about within minutes matter that scores could and our have our it's support time invoice created. model, is net from owner weeks, other it. where a to a of it different

working at been it's and our As for of of value core a the we've kind propositions. on our years reminder, this been

respond North ability way heard it, we to are in they but we the in of to has position companies trying meaningful We how other company this to believe that would do the that have any only America.

David Westenberg

And IRR thoughts that they if Got half to strong? continue talked back sales expanding you perhaps is you Is BXC the it. Could test the on any then, the see there channel? the you as about of the force particularly year. not

Darryl Rawlings

XX-day are we're are We sales, number this of to initiative. year, but sales Trupanion on those the and would call we the but that years call partnered we in are expansion both pattern way field, multiple work a hospitals, we multiple points can over planning Express, the planning touch that people on the number continue in which force the with areas of as on hospitals typical next inside internal of is sales have is inside the inside able this expect to throughout in do. our Territory expanding outside also them, I that supporting expanding Partners particularly, of

two areas on. will, focused obviously, be that biggest So the we're that

David Westenberg

Is that? And you veterinarians successful those any Trupanion at then Express, expand of to give to the on question Express. you're seeing in in some last When are the enroll how there programs? opportunity incentives one you order Trupanion to looking

Darryl Rawlings

not it the that What to that education. for have do do it. is number or Express Trupanion we're through we Express. get either software our not to for to every of using are charge Trupanion no we for with anybody and year cost We expenses are increase giving using veterinarians doing get Well, trying or to enrolling hospitals the veterinarian incentives have be trying

is ability Our that biggest effectively much compensate limiting biggest a is for appropriately factor but deploy not our and we constraint, clinic it. not demand been our to has as installing and do it,

Operator

with Our Block next comes Stifel. question from Jonathan

Jonathan Block

me. over X one, rate of first which the the past coincides two growth adds the Maybe seen the deployment Just the of from quarters, growth accelerate year-over-year largely we've sub with really Express.

So hospitals is of I'm the the accounting I've you got or acceleration? asking of the call I and things a legacy express guess, that Darryl, majority tweaks just then it also doing overall making for are Are And some hospitals? your better non-express follow-up? in

Darryl Rawlings

And I we question, a in Great couple a things. coincides new That are at pet level, Jon. high of -- seeing acceleration with adds.

has One income of been our operating is them increasing. adjusted

amount the have increasing. pets funds has enroll more to deploy So to we of been

continue going come. to for is that increase years expect We to to

have the So is big a that amount tax driver. we of

The second conversion driver be rate. would

we're building at rate, this as the So brand meeting. awareness, and shareholder conversion talked our about I

the ticking last as Our well. conversion been over up year have rates

building Trupanion we you would going better of as a also that helps three, Express experience out think been combination we brands, doing I conversion scenarios, all in Now that that but and mentioned, little rates, customer -- as as have it's know well I has of tactics say lot our in a we're with those there.

Jonathan Block

just want to And landscape. the gears helpful. check shift over competition. on then competitive the Very Okay. overall I to in to just

much money. pricing been pay might aggressively, you others been Others them reviews. think making have do. not believe I you but for any don't had I guys

been update change the us landscape? pricing shifts, plans if Have there in So an have where on give can been competitors, sustainable? not any from it might you maybe any

Darryl Rawlings

constant. what be priced So was the out. given XX that than we against brands. might to pricing as differently we of may landscape. later a -- over by any been To the a may has At year That no we're inappropriate. are remains is competed a or would we time, growth come your there believe part because XX couple the tactics view was, kind go we've question landscape be cost-plus general, clearly question, which with the don't change years, would typically new a part higher competitors? first in targets. others as say the to last and lot being do, of XX think -- what perceived don't that Any on We're given about of we of what couple I I But in more And concern people ourselves subcategories other model. any

changing really not not business, something are But our have for that's year multiple accidentally a some competitive because sustainable years, but their of reasons. to inappropriately. two, In looking line competitors typically might themselves at We that's pricing they and people or for deal not this try priced for accelerate growth we've with.

So answers hope that your question.

Jonathan Block

question. It does. at sort other guess, crux there. a can the follow-up just if And I I just of maybe ask I was of

guys don't, You know and your clearly expressed. accelerated have adds probably you exactly why we part of that's

the little quieter. bit curious, a just I'm is competitive So landscape

it. their discussed there their subscriber your had that with out where not, had I maybe some been [indiscernible], that potential was plans intentionally going we some whether the there They skis. of had made that's over think or I competitors chatter or you in got over that aggressively, maybe past, priced move

Darryl Rawlings

think way of to landscape. competitive due accelerated in is -- any competitor any don't growth I our

increasing has building have it we've adjusted rates been think we're I rates conversion try been of become before, has that to Trupanion. been capital up deploy as we to getting. leads as said and -- and able to operating I retention more larger, slowly And convert the awareness income slowly our brand

Operator

Capital Markets. question next RBC Dylan comes with Haber Our from

Dylan Haber

rollout far, you that given it's up to year expect full year. positive EBITDA EBITDA Or think ones. be fair Just to and operations? only in last that think of you an be said do more hospital it will Trupanion to it's believe two XXXX? But growth? that your could you the for Steady be it's you the I s-curve you you ahead accelerate do do as expect adoption streamline maybe quick And that assume so then, Express base as Eddie follow across you're you year-over-year tracking active product,

Tricia Plouf

take the I is Tricia. this let Darryl answer and one. first Dylan, one, the will second

interesting. in we the pay adjusted for are on it's reminder, operating deploy I time. our acquisition over and we the question, and it's as then of upfront income say grow, EBITDA essentially to generate adding we your a And how So that and benefits many and how spend is then pets adjusted we a we get result much how pet EBITDA much because

so being better the that would year-over-year the mentioned, -- say equal, be being revenue consistent said, the next a if dramatic new year, more operating wouldn't but And prior or more pets, have the than updated year do on And and would that our year. year, revenue would that, this have for to slightly have add guidance to so. I of things what incremental I impact we to an based full on opportunity expect would deploy in all we was impact EBITDA choose the it which do we of margin

the we and of above within rates of cash average return flow an As being as are XX% internal pet for guardrails long positive.

Darryl Rawlings

kind asking you're working Steady years switch. acceleration light on at is ahead. and this any Eddie? Trupanion are we kind would from And think I a of expect answer of And with that be active a clinic about we've of years do adoption Express. of type it my And a we mean, It's be I on this for Eddie. a not Steady the will time. been for working X hospitals

more of think think a it. about Eddie is way to I So a Steady

Operator

Tom & Champion with Our next Cowen question Company. from comes

Thomas Champion

Farm? update Express Trupanion the any been just quarter perhaps number Trish, And It could that's State of with your hospitals us sounds growing. cooperation as update of if on end? like on total you

Darryl Rawlings

Trish is me. at pointing

So this I'll answer question.

basis just Trupanion the is my Express report number letter. hospitals of Trupanion something that on annual -- shareholder So the in an we

color little tuned year. at the the meeting. we no meeting, bit And more last material was, were a second We that no it shareholder and and part a testing really might on at next the shareholder be partnership So -- early that provide updates. any for days we mentioned it's

Operator

comes Northland Our Paul next from question with Capital. Penney

Paul Penney

other item, in resource the the XX% has line growth? -- sizable source on increase can in you of the specifically bucket income the been statement The revenue terms there of us business and refresh in what

Darryl Rawlings

a off anticipated. rolling but that we program one But direct-to-consumer, of is there's And two than then, on, and we're employee pleased material is two there, faster paying to little BXB rolling most that's call not this reminder, are with it, have which Those P&L we some different case, a what's rolling a slower it's some in on is on a or of brands XXX% federal somebody anticipated, pieces. a other have our there profile. Well, in other they it's and is for which another pet. little play, with we other, do cost And the than one helping a don't that we a is off then, the but revenue government. margin the we same progress a different PAC the are for there, the in not in where at the And benefits, is, pay percentage, on cadence can another not same it's have roll point. direct-to-consumer. roll and monthly cost, about typically We small have other our

bottom kind other an XX% of we So of revenue X% target to kind line.

Paul Penney

one last And Great. one.

to holes in the then home recent where at you to back team, Associates? corporate Trupanion have can potential fill? field hires the and the some had about base you talk you both And forward, with your some looking Going your

Darryl Rawlings

that's Well, broad a question.

and our we we like continue finance Seattle and to people from add and every support so and continue actuarial, data to department, add numbers. IT, to not in office in So functions only

our We get to are fixed well all adding those X%. numbers scale to expenses trying in of

might that same -- et line. So which to to are a is top cetera, added day, same those our hours the being automation growth. our as a to our invoice, at service, our about members, rate that the customer are the ability as bit more existing are week, time at down growing claims, supporting meant X roughly the XX come. pay those of we We rate claims In a see adding we're not be areas, get years days we little other in at slow

are in we Seattle office. adding so And people the

it be homeworkers, that people here may and big? back they and have lived, that area. worked more City, their wherever on having so Want Go are great. a to go would take that in for months, people We do Kansas another six role

and We people around operations. more around out our Tru-University, built have hired

department, we've the last we've and people more people in operations. So year in people the more hired added regulatory

the pleased build I scale of group resources. the we as tools sure say are next making that, have people and So over But adding. the I'm would up with right that we five years, the we

doing on job at the here about that. of and In in cognizant are for room training. trying improvement always top Trupanion a better We to have the past, we stay And very there. culture we're

Operator

Instructions]. [Operator

with Craig-Hallum. question comes Kevin from Ellich next Our

Kevin Ellich

I to how the I below the made guess, comments target what's full half guess, that year? I back the prepared AOM or for of little I a of think back bit over And, plan the your trend year? the guess, Trish XX% about going should expectations.

Tricia Plouf

XX% It's that that we the we yes, talked margin driver for of about being the not it, compared when about XX%. want so to at for adjusted margin to at trying X.X% recap, compression roughly I where scale. XX% be XX% we're the of the and being get for operating the to to Kevin, Long-term, closer Trupanion we margin are prioritization of appointments X.X% year-to-date quite Express margin to quarter. in at earlier, main XXXX. that to instead year-to-date the gross full the is Yes. we're us because where of mean,

margin and given up say given our target would And XX%. year that so I progress this. I XX% guidance that still towards say, near-term on continuing closer would get to XX% make of we trying compression to is this this haven't just But from

of yet. items year, which Now back new building, the that hasn't from the the one half in the purchasing will closed have of the savings is

only partial. it'll be So

million we a terms probably out year as benefit I only there that to in get model And so that $X for around of roll on. would this

Kevin Ellich

remind Darryl, the being year? the and helpful. by automation to roll of And many you you out, are many the vet how terms can into get That's practices? Okay. by received us hospitals how to end back of Trupanion is plan claims And then, Express the the going where at in we how

Darryl Rawlings

So Trupanion to Express, added hospitals, we -- trying our add to in than long-term, to my year, XX,XXX. year get last last is shareholder but letter mentioned we're that this we more X,XXX are we goal in about

to long So travel. we've a road got long,

a us. is today are about About visiting America. XX,XXX. recommended North today them and Last of about XXXX reminder, there us we visiting -- X,XXX We're last in XX,XXX clinics we're have about recommending As actively reported and year, XX,XXX -- actively about Trupanion Express.

guidance many we're that we more year. like giving want more how and not So pointed we every on except for to would add any

our past quality. put to and the in have speed increase accelerator We on the without foot tried

to two balance things. So we're trying really those

Kevin Ellich

then, else to did something -- And going business Helpful. back sorry, other Okay. you there? have

Darryl Rawlings

a about matter then You So with everyone asked days, and a about for seconds. I we're their reimbursement of, by early as typical been mean, we're how in Trupanion Express, automation claims talking pet claims but a is owner reminder, received? mailbox that's XX been and a doing -- paying With loves model we've typically minutes out-of-pocket in paying waiting under automation, it weeks. it. X and

where So we numbers. live still is tiny But far. so in and a it's speed world important, encouraging

Kevin Ellich

in going? you traction are business I in it. gain wondering, how market? Other you And know small. that Got then But to just the benefits. conversations continuing group me segment, are And mentioned is, one the from last it's

Darryl Rawlings

we're year-over-year plan, will be traction. this see But getting the percentages some for add-on is traction giving think their something of that's we there a that are could see cafeteria and but more of good valuable we're being companies also retaining there just area shareholder some it's such wins. where places say in this I percentage instead would next team a our it's more that And better a is some an places talent. Meeting, as encouraging, that be think basis, highlights very we paying a that for gaining that And questions. seeing Annual in a I are they material. the a and don't look small where on base We at year

Operator

next comes DHI. Our J.D. question Delafield with

John Delafield

a and shareholder could the more times rates. if about today you conversion conversion rates at a Darryl, causing talked about increase? the improvement wonder meeting speak And what's of I to bit you couple in little

Darryl Rawlings

our Yes, for logo little have that know when to a becomes they their wants us, a tag people see to if think and we to and build budget a or consumer whatever their call and for that company this brand, high are bit is of help trying a where do J.D. a brand this level, At I hopefully, sick or loves them pet pets when a our what they company smile that on a pet is injured.

rates. we're of to a And building consumer overwhelmingly we're So measuring I brand is is way conversion a -- brand. consumer higher what think a doing starting build

lot the on except person right there the We've at having of our Now message we tax lot a time. to is of from do right made website. a investments the

doing in We are more things mobile.

being things We to with Trupanion are faster doing communications text. give stronger more a like Express having We're selling able proposal.

amongst about trying improve about and I everything years with So now to X.X ago, to X But ask million there if consumers. think about have we I think, next approach it's And on starting building the emphasis really long way a our if -- go doing, an over still would've have lot XX said, brand veterinarians in impact we we're amongst make would that you years. building talk me on we you -- we're general, I X a veterinarians. to of a And to pets, of as brand. we're

John Delafield

Okay.

that your people The really revenue you've of regulator. leverage sort that gotten stay you use of you've at second And the from guidance the question of should is your and raised regulatory to corporate part told total XX% rate primary capital. a under ability around of capital or the sort year buildings historically, because growth that

up? growth -- ceiling the move So with additional this does potential capital, rate growth that that

Darryl Rawlings

No.

Tricia Plouf

the that requirements different and it requirement a you cash of I deploys get No, for credit effectively home capital add, the don't same. just feel is sitting building so use remains calculation that capital in your you just get more change. of the our The that cash, just than there, for but the similar it's would the credit we amount office,

Darryl Rawlings

is this does up What it working frees capital.

our gives not growth had going capital, opportunity this we should we're our it because are than long-term target, have our all not to have being deal. to but faster when we that. operating XX% and if you would have, So then, And of done adjusted things equal, the us that grow it consistently, increasing happen try goals hitting and quicker -- to income

Operator

you. Thank

time are you for out your of for questions. Thank We participation.

You lines at wonderful day. have may a and disconnect your time, this

Trupanion (TRUP) 5 Aug 182018 Q2 Earnings call transcript