TRUP - Earnings call transcript Q3 2020

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Operator

Greetings, and welcome to the Trupanion Third Quarter 2020 Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Laura Bainbridge, Investor Relations. you. Thank

begin. may You

Laura Bainbridge

Margi welcome of Participating third Darryl on and for Financial Executive and will Revenue results be call. also Rawlings, XXXX conference Officer; available Officer. Chief Plouf, call. today's Q&A Tricia Trupanion's to afternoon, Chief quarter Officer portion Trupanion's the financial Chief Tooth, today's Good call are

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

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

Darryl Rawlings

basis. retention We Trupanion to another period. enrolled of prior revenue Similar year-over-year QX, lifetime average year-over-year. Total extended Thanks, new months, this ended high a the to Laura. total with Within pets XX-month up months calculate XX increased business, strong XXX,XXX and driving QX grew XX% accelerated quarter net rates, the growth in with was subscription over pets. quarter our pets. we on The net year retention pets with XX.XX% XX% trailing is XX grew from average the in monthly cancellations to subscription

Last XX%, intention and including value our do In in team. targeted while in calculated XX% $XX.X Well a retention quarterly adjusted to million. single year-over-year operating quarter, a grew for so. highlighted drive million we to internal hitting the done As our be aggressive average more midpoint us $XX.X metrics, our acquisition at including expenses was value Adjusted XX% prior the key result, way return strong income for deploy capital of lifetime of paves to of quarter lifetime a the helped deploying fixed able growth. spend. period, to XX% pet, more our of of were we compared the income rate to our year $XXX. to the in pet, Expansion operating a quarter, of XX% range

to strides amounts operating adjusted mobile income decades Our and will the years while under-penetrated beginning confidence grow we've social take me return made rates of ability of for April, internal at and this that large capital increasing of Since and come. to media. in deploying market we both able also to be good gives the of attractive advantage

As reached four an audience X.X example, that webinars have held million. we've an of over

the in to our to company. within on our Across team of Since has service quickly. the answer This levels, in them. upon support service the two a retention as pandemic, no build skill but easy growth. improving The to growth and benefits we're strong invoices are incrementally of veterinary task We've sets accelerated members pay quarters of organization, the the result. pulled the maintaining of the levels. We phones the continue seeing these together also will seen only excited improvements given year-over-year is high pet sequential net now tasked not and our start be with team

gap it's This year down period. going and of X.XX. investment nirvana. basis delight was critical the XX in to people a double third are to over represents point Continuing on nirvana technology members only exceptional our these efforts. to the quarter, through our member improvement In our We to the to support experience, efforts prior

where As At pets cancelations. friends members offset a a number the state pet. the we as or power reminder, of of referring the we adding understand Trupanion, nirvana existing define

given working, pet the Undoubtedly, where bring the a household. transition changed. the new has remote which of work and to has how people One few into perks COVID freedom of has many the been to

United that the one pet penetration States. in over with know the earn supplemental insurance out now announce Those leading Aflac the a years a roots are medical strategic remain that reputation we than households. holders recognize excited X workplace very million a as XX trend are worldwide. Aflac, the policy insurance Today, in have Alliance XX work consumers ever more should many come. strong We to confident benefit With provider as trust as the they Aflac, for know that of positive to of at has Japan them site their also helped four in brand, in with of

models. of XX share with per to million with Aflac headquarters. months when Aflac first months began drive President relationship to has values a and Aflac Seattle share Trupanion that similar Our committed current and the their a over In came $XX both alignment, a price lockup. investment our ago and follow, CFO we at cultures, $XXX business To visited realize X-year

in to Trupanion a leadership unlock the insurance years States position of several offering with leverage pet Aflac being the be United next the over work commitment Our product to at potential will sold site. the

forward I'll with over Trish, our potential to the a both will Trupanion to world-class and we look opportunities the the good hand With is call exploring quarterly of to we Alliance. to for committed We also team over organization, working the Japan. to to believe feel humbled deal and years more this are that, in Aflac them. a with bring Aflac our companies, next partner is honored several We detail. to and unlock who results discuss

Tricia Plouf

good Thanks, Darryl, and afternoon, everyone.

financial quarter results, with which once our are pleased our We again expectations. exceeded third

quarter our pets. other subscription business Subscription solid for retention year-over-year. by XXX,XXX $XX.X was strong in and quarter, was Total monthly year-over-year. in the increased XX% overall million performance segment. revenue revenue approximately up led Total positions growth $XXX.X the year-over-year our XX% and in up business subscription enrolled continued Our million, XX% was growth pets strong to

period. on spoke X% last is which currency, September As year. revenue to be prior Monthly year and was XXth. levels the calculated basis for was XX.XX% year-over-year. the prior Average attributed the monthly a through has we to the In about service X% retention, prior X% period. continued of ARPU XX.XX% year average an over our per U.S increase $XX.XX, The improved and that Canadian local call increased over focus on year pet compared ARPU trailing increase in the of of can quarter increased XX-month our

number a growth other million component, that revenue, comprised increase of our revenue XX.X% and revenue for within XX% in XX%. in BXB the our to quarter segment period, year XX% business other of target year in annual year-over-year. was prior increase reflects compared gross quarter, the $XX.X XX.X% our Subscription the enrolled. of totaled an the is margin to over pets Our from offerings business generally an which product in other Year have of of

subscription Pricing accurately trend X% of revenue, on paying XX% to subscription percentage current value our a ARPU require of the to proposition to As X% of annual veterinary expenses. comprised of will as margin increases. and was opposed year invoices XX% X% increases variable our X% gross

margin into increase were fixed during the to XX%, make quarter our margin continue which to business X% expect the continue the to revenue period. gross next in trends on progress We with see segments. quarter other year. Total pricing includes lower prior of initiatives year was ARPU consistent and Total our expenses

compared otherwise trends, our with As but quarter, income with grew of adjusted net during which and small a XX% the adjusted continued in X% generated total fixed subscription gross operating fluctuations maintain majority third income Adjusted and variable prior operating XX% expectation, expenses, targeted scale to $XX.X at year target of operating we to absent to was line our our adjusted of QX was from With in margin our million period. in year expect during We last was operating revenue revenue below our we scale, million. loss the income adjusted the year-over-year. the of at would achieved the subscription business quarter, of quarter, operating revenue In quarter margin. line and our of $X.X million. in increase have is $XX.X XX% income in margin. fixed vast expense reminder, largely generated The our

lower as on basis XXXX, in income previously September X adjusted annual expected this, our momentarily. reflecting reiterating even forward. of growth prior based veterinary largely expectations increase that which To worth over is and slightly an ARPU year out further cover that operating XX, This over income fluctuations revenue, the will small cost margin our fluctuations, nature our illustrate of than year ended to on period. is growth These rates are It's quarterly growth to million, in a $XX.X invoices the business. months on line a the XX% of Our noted. I which the gross is the of year adjusted outpacing expected a consistent for moving the subscription revenue basis, for of totaled trend be total operating course full I with with and

pets the quarter, the in return During an of acquire new for operating deployed of adjusted single subscription to resulting XX% of XX,XXX estimated in our over rate $XXX quarter, pack million average income we $XX.X a a pet. internal

year calculate million cash $XX.X the debt. in we how as rate $X.X cash compared in balance of cash of return, the in financial the million existing quarter line materials million to approximately million availability and basic the compared on the of of was refer diluted $X.X September was share period. period. At prior reminder in sheet a flow please year Investor was basic compared the internal Relations of million flow a $XXX Operating year credit. portion of $X.X loss investments Free $X.X EBITDA to Trupanion's million our $X.X the For $X.X supplemental company's $X.XX million quarter with our diluted to we Adjusted long-term million and million or website. remains the the compared on million loss prior of or and XX, prior Net in quarter period. period. year over in had per strong $X.XX net $X.X income share to $X.X to ample of per for prior in was

to outlook year were accelerate will continued I'll us mentioned, our announce XXXX. Aflac. full Alliance strategic sheet, we The if balance reduce reliance investment are investment from strengthen reduce our our for of now this we million and Darryl to for on to pleased to debt costs and and $XXX our growth, frictional enable the strategic proceeds our investments. As turn allow from technology

we in year-over-year are quarter our revenue This to into revenue at to of reflect year, be of full XX% performance million XX% revenue fourth the quarter. year-to-date the midpoint. midpoint. overall the range to now for expect million, visibility the fourth $XXX full representing growth the We increasing range growth implies expected at the For guidance $XXX our and year

be implies to the $XXX subscription million year of XX% midpoint. now full XX% range million Our revenue at expected or $XXX is subscription growth expected the quarter revenue in at midpoint. the fourth of growth to This

is our margins, return guardrails, acquisition projections we adjusted $XXX for of the pet year which Canadian segment, keep $XX business mind that continues for around XX% the in the to million please perform XX% but other to has spend would At this pet internal Our midpoint, total these expected revenue from to equate the around between of in coming Within per full the our $XX acquisition estimate we range rate $XX $XXX fluctuations business. to the allowable total of to lower rate expect updated year. year U.S subscription operating income now be Also, around levels, revenue for well, conversion $XXX million to approximately the million. and subject currencies. At are for to be million our with year. spend

end XX% up for Margi Q&A, With And of and and we For will Margi a our Tooth, a used that, regular was be Revenue at that questions. available moving for highlight forward. Officer we our is open it conversion joining Chief approximate call the today's I which the I'll participant us before quickly now Q&A for are Darryl, September. rate, guidance, rate

Operator

Instructions] Please with proceed Our your comes question. question [Operator Capital with Khajuria you. RBC from first Markets. Shweta Thank

Shweta Khajuria

Thank you. Two please. questions,

about rates could marketing? subscription understood First on you’ve call, that does hearing supply you to that were growth call And talk that you the terms that hear X worked, through rate Thank third more from meaning X you anything the in quarter. question, supply that Darryl was you vets then additions, which earnings quarter started months continued increase out pointed through the that into last channel and -- Could to did the of and of retention are help? And additions, on July, about similar takes effects. up, going What you. efficiency in -- in had marketing it there vet to the you quarter, what effect.

Darryl Rawlings

increased it the the the start throughout leads question saw answer quarter. I'll then to conversion to we Shweta. increased Across Thanks, and board, hand Margi. over the rates

definitely we're seeing growth across of the our all our pet strong effects net helped rates retention So channels distribution and growth. increased

As factor add? are far Margi, seeing seeing that QX. that as got increasingly and household, busy during entering new we're to in pets veterinarians are QX increase entering the we you anything

Margi Tooth

base, the animal the Yes, overall they’re we the continuing. I have of how strong We that’s busy [ph], a account that through we terms think in hear still channels, efficiency channel noises, the space. in core health

reinforces just and the there. that think have core I strength channels the we

Darryl Rawlings

there? you are Operator,

Operator

Yes, here. she right if with I or not. question wasn't another was done for I'm question our sure her Do you have speakers?

Shweta Khajuria

go give back I'm think I'll chance. to a I set. in the others all queue

Darryl Rawlings

Thanks, Shweta.

Operator

comes Our your proceed next question question. with from Street with Capital. Please Lake Mark Argento

Mark Argento

right. Aflac a but Good the All on also congrats deal. and everybody quarter, strong afternoon,

brand to plans going to talk company. just bit. to bit going a product. wanted you XX% little that a into to bit. little guys it you’re could investment, the the roll out Just It's a maybe Are the of dive big pet like, roughly Maybe you talk a that little [indiscernible] have, strategic that maybe about you

Darryl Rawlings

Sure.

the, as the are a investment. going we And to medium site excited opening have the both the try in $XXX commitment to we years, small, U.S. with will we is businesses. in part work super next we over make is work sure That's and is of we'll on large and unlock probably with million with mentioned Aflac and and market. we'll the of two very there's several product There's market. potential. partnering unique site alignment. areas alliance, going about Aflac for we the channel -- that focus. identified U.S out great And and them them. a the we're -- to work figure to come Japan. really a that then Japanese for can as well the the in It's remarks, So right in market, strong site second work One into that the we And how access and up enter them with strong is

Mark Argento

there be it program? be work will a all or through through their site So play Aflac will direct-to-consumer

Darryl Rawlings

the but focus out will year some there efforts work The we'll or that over the be and site, additional next work be may so.

Mark Argento

Farm then but sounds And on It from I was going the sell think Farm, anytime me, well. last plans things And State initially on product Great. to any rollout? State be like been will you have available agents do the it the updates have any question directly able to website, soon? the

Darryl Rawlings

Step as the Yes, we for no quarterly at last Farm access. big call meeting. from in the sure well the website that shareholder people the updates entering that naturally last Farm -- State was State could making mentioned have one as

them of to third engage And stage the to will try inside agents. to XX,XXX Farm The State that to phase the allow be, to website. enroll perhaps then second their is of work

Mark Argento

Great. back I'll Thanks. hop the again. Congrats queue. in

Darryl Rawlings

Thank you.

Operator

proceed Jonathan [Operator from comes question. Block Instructions] with next with Stifel. question Our Please your

Jonathan Block

Good call one, pet Thanks. cost It that. with a acquisition first the that of around been I of think it a progress called on year-over-year, in pets, Darryl incremental year-ago. guys. like Hey, seems the versus and and quarter $XXX, afternoon. might've $XXX pack the lot congrats out Maybe was XXX in nirvana the on on you that around the

channel you surface are part a least advantage of guys of you the is those of nirvana, can it versus $XXX. see progress at that the I versus in deleverage the supposedly just think of $XXX the we sort have made for the So reconcile that which pet very that [indiscernible]? on low pack acquisitions on cost offers Why

Darryl Rawlings

Yes.

to internal the rates with want the it which of year that great going are amounts way income, So return. be able deploy strong business of increasing of having into adjusted decade we we year next majority and and is this the operating we think to about next our

rate to the we XX% by to of income our allowable in the fall retention. XX% driven well the target. adjusted adjusted spend, operating the of that the pack that the quarter middle XX% multiplied our internal per or is they're dollars we and margin, For by think about return, had bottom a actual line operating When that pet

million rate the of XX%. As increased our retention our I'm next million, can $XX rates to I teams I of pet we've taken expenses capital means value, at this close and increase do next dollars have our the lifetime our XX in at of XX% is income, our will operating from sums used operating value now to internal after soon think reduces of to about to payback adjusted a the of deploy dollars time deploy fact allowable greater lifetime say of we team has to be mentioned be spend thrilled. adjusted our it about to are millions likely means that to internal The scale. before, rates $X which and continue has to increase fixed what return that of us maintaining able the hundreds to XX% months return. million to This or be What targets. hitting year, able decade When of $XX as income. to those be I more that going well increased of growing from that period of XX the

our value as costs should we pet on quarter. always Our a pet after individual basis, after up quarter acquisition quarter lifetime to be going continue per increase

business at to grow growth for us continue should us that easier it model spend to accelerated in our So make allows rates.

Tricia Plouf

fully more a investments the well, us we but that -- gets incremental a in to new month-after-month, not those those of them within bit to can we'll not what themselves core channels, give grow to But continue the will color, and incremental is long-term a said, is, things. periods strengthen of to a manifest quarter-after-quarter for of two as may and that particular us year-after-year. things have allows themselves there's we just both it channel, only go ideally do that one if more over and kind that which of as One said. Darryl invest manifest quarter, things thing, to quarter. our John, in and confidence for that well current add little what couple Those lot I time, Darryl back Yes, they

Margi Tooth

can answer I well, if And it's that Margi. as John,

at nirvana what the growth about of terms way we that us the to think phases in and of with Just too. pet April means perspective looking when our approach from initial analyze a the onboarding cycle

drive we they It's that the we pet. look from sure onboarding to approach have that, group nirvana perspective. which very a sure just So also make process, itself but in don't at smooth to enroll the overall making helps

But it's we can courage move it will return guardrails on up all the you return a convictions within sometimes [indiscernible] immediate the in but XX%. wrapped thing. always an operating XX% line, that in that the point, our continuing as same So just see and with of we that to the are sometimes the down to and see

Jonathan Block

Got helpful. it. had if okay. that’s I questions, Very more two

There the to gross adds industry gross first have earlier of industry positive on on The love but an what vet number a to coming growing. to adds, where pets commentary up one, number, just It's a Darryl, new is accounting I'd today specific the player from channel year-over-year. XX% some healthy get strong you pretty hold. your about XX%, were the views

year-over-year to I follow-up. the just and So how that math compares maybe can a you adds comment guys. the got XX%, XX% just industry? gross first, on, Thanks then on I've think you guess, final And

Darryl Rawlings

Yes.

ARPU. the industry the that maybe around X% think pets, about is typically a And we for that's XX%, XX%, XX% growing but category. XX% revenue plus revenue, XX%. So ARPU not with

So that's seeing. we're what

you for of As at all hospitals, partners cetera. visits strong vet we're -- health did the mention animal seeing et our

to expect moving continue we forward. that So

Jonathan Block

be to a then mid pretty of base on year-ago. And just comment XX-ish DSO, third you can a it broad the Trish versus north XX for question. Okay. seem you,

comment guys that where And the give to if month see color where AOI, certainly about asked currently there. round, you share, can but price value ago. were clearly then higher. continued I the for can move Darryl, below about but per And finally, mean, go last you a I the you some you are investor, If that just of on notably just the we $XX Aflac. and the strategic

you could color was or provide arrived Thanks talk So your guys. at? that time for some to, maybe valuation just on how

Tricia Plouf

Sure.

briefly revenue. if AR to within balance to directly is which that Majority annual policies, customer see you have accounts allowed not though other the monthly the yet. remaining outstanding, of on increase the increase Just payment the puts receivable, revenue insurance the as from days the that the and relates that business terms, due accounting even it's comes

it's looking months a So payment the policies, way. a other those, XX of subscription issue you and late still and remaining business sort in backward would today then is it which XX the on not in business see that of AR. them, nature will just not related have to any our month segment It's you enroll if

So the also when is revenue growing. AR the is growing,

Darryl Rawlings

committed of that take both considering with price a $XXX as the lockup. for to And fair at XX-day that's cash $XX investment think it Aflac to, in we we parties a it has average a X-year kind million our John, did that lockup. share price moving X-year

Jonathan Block

guys. [Indiscernible]. Thanks,

Operator

are There no further today's conference. This concludes questions.

You may this participation. and at lines disconnect your your for you we thank time,

Trupanion (TRUP) 29 Oct 202020 Q3 Earnings call transcript