TRUP - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to the Trupanion, Inc.

Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to Investor conference Relations. like host, to now Bainbridge, Laura would turn over the your I

Laura Bainbridge

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

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

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

Darryl Rawlings

was an and I'm income excited and team able with Laura XX% rate prior year-over-year Adjusted the to Total afternoon. revenue quarter. of XX% key period. estimated increased year over good financial you total, XX%. in measures capital Thanks the our operating more internal year-over-year, return for XX% increased deploy of to at the share

adjusted of we high of XX% creation. exceptional Because levels in of Compared hard grow portfolio internal the In sustained input operating members adjusted for impact growth prior of from year year market, to The income deploying rates TruTopia of of team. return the year, ahead. state to average from accelerated sums pets reminder, our pets trailing prior compounding believe pets. year do. with growing towards operating TruTopia, a our are indicator a net income adjusted XX.XX% performance drivers per the at intrinsic generated months In a increased the the period, high to is operating pets proxy TruTopia off. the we business. progress the value a TruTopia, months the also self-sustaining quarter, period. As I turning and retention dollars the increased plan, and operating referring sustained performance year-to-date, prior the will well levels our it of means these XX discounted of and In tracking to XX-month our expanding period. The a given months, XX% narrowed our benefited cash or margins to primary In X.XX%. underpenetrated income offset is view from leading retention. high of aim mere reflected we existing nine are per growth, of a growth, times quarter, up adjusted share pet of adding In period. XX-month currently Well and in a flow cash majority in to as over is XX basis. model, very income value Typically, our pet our the new gap this growth. stays average represents Growing is we of on value defined intrinsic of we done XX% the in retention for monthly friends which large Trupanion first for invest

quarter, business investing and be Letter. I'll growing in a Shareholder be plan, so. both of innovation successful Over in we and our invest to Canada. income, likely their who expand can position are Achieving put most Annual the are year's our disciplined in ability and launched can on team's focus medium to products, health our my few those in work insurance growing in to long-term, compounding areas. we remarks we and company pet scale, In ways in operating the Furkin sums operating this greater capital to found manner, adjusted XX-month which direct and addressable believe a is our low We do the market. highlighted us ARPU

to we'll within to operate parameters, addressable transparency capital greater industry. both grow same offering allocation market, while will We brands the over our our and aim time,

ability the our we means our end By that XX,XXX international adding we of overall market Our addressable by to XX,XXX increase XXXX, North from We America XX,XXX market hospitals. new grow at operate to markets. XX%. intend by to also will This able of support this in launch globally. scale are doing on the to aim

our doing expand also Nine active into our While we expect so, hospitals months totaled plan, to over hospital active base. XX-month XX,XXX.

prior growth hospitals shareholder the the on information interactive more years, letters. see please For our over

products, grow international our As scale we and should of business channels, markets, distribution evolve. mix continue to and new

adjusted our that invested deploy, are capital change progression. income, won't metrics drivers value business; of amount of can operating the the return capital. reflect our Our on the the and we What creation will for our

continue Drew Trish. team welcome we strong himself to Before congratulate the humbled a his To to attracting and to has our around it over hand our it the I'll that, a member. all are a and it and promotion to take in great CFO. Drew to call over hand pleasure be culture I him talent quickly board. I With the to it's a moment to want Drew, on mission-driven to May on leader joined shown Trish, formally team. to be to us you by and to organization. I have me, speaks

Tricia Plouf

quick Margie, results with, the plan. and I on XX-month as a our and that thrilled my discuss to a My joined would I'm transition EVP natural pathway transition. well resource outcome. were in With all timeline I seamless. with Drew We to, long-term the ensure I want leadership strong do finance of to his that be execution focusing look Drew that closely to to felt be hopeful turn third work smooth I and forward coordination of operations, to the CFO. further Trupanion will Finance sentiment take a detail. Darryl's so Darryl. to to Drew our of congratulate in when and to that responsibilities echo will call a as Drew's on provided he strategy has remain promotion on team purview as this moment will over Thanks continue and our and his included, to a quarter

Drew Wolff

means adjust headed. and learning Trupanion's and maximum thankful pet over elasticity. past to everyone. pricing career, today for several the speaking you delivering Trupanion Chief which one evidenced This I'm I've and $XXX.X In Tricia in and going be months Financial that business I'm Officer. year-over-year. be afternoon, you, curve million, results Thank churn, by as been keep the lifetime Trupanion's steep retail aligning This a that, and good Darryl honored with it's only the in drives of industry. is inspiring, value day one veterinary to means starts of their to Trupanion talent, veterinarians. that exceptional at counsel our with our addressable humility to fundamentally XX% model needs I've model. that great and is guidance invoice approach results a especially creation a this my quarter excited aligning these for with the and ability part proposition time. massive sustainable Total growth and quarter. Tricia work Trupanion up allows been us I'm during more I'm I've targeting so where the to their pricing of of ability at reinvest of and target we passion, high is with The short, which into income the but our to for market our be highest excited while aren't for part retention, not value every value With rest investment highest for not to our I'll and the a return. of team to the revenue to the expenses on a of other to while cost rates pets, team brings Unlike business is All is of. adjusted increasing interests compounding a that all a XX% that or with operating does was approach, stakeholders. a pricing a the shareholders, owners, organization the focuses and impressed approaches engine growth. total our proposition, to different the on turn value is of experienced plus We're point the our members business our truly mission-driven

to which up that while ARPU as I'll X.X% compared the constant is to Our so products trailing is able calculated retention approach a in XXth. $XX.XX, for currency retention, is average September job revenue do other of reemphasize million, veterinary increased XX% output Trupanion's impressive. and period. Average paying Growth and continued year basis. we the of It's a approximately subscription XX% performance year-over-year was in X.X% be strong in pricing. I'll especially On pricing and across business quarter XX.XX% was on levels XX.XX% energy this additions still ARPU P&L our we're is invoices. the cost to pets year monthly plus solid our than If that was on many proposition the reiterate $XXX.X enrolled pet led unique business, will our proposition. on retention in fact over subscription increase Monthly our increase the or high we in strong do geographies. businesses, per Total value currency of of of value or subscription accurately represented a cost growth, XX-month in basis sustained XX% of reason, of subscription well, our spend less to means prior reflected standing mix monthly pets business was year-over-year that accelerating XXX,XXX of an consumer an to revenue last our basis. our gross and monthly business. Within growth by constant our

our the that For shows target. veterinary the annual third business of is our model was subscription our aligned for our our cost our in paying XX%, commitment deliver cost ability with for to pricing plus and aggregate emphasizes in This and line invoices quarter, with customers.

high staying driving target. subscription percentage and with our true operating way to X%. flywheel, year return. to even our even XX% invoices, slightly the variable fixed rates continue base, variable in pet our in the calculate expanding the margin subscription Future higher In long-term growth Of business adjusted that we fixed XX% of delivering lifetime expenses, important areas basis value these, is last progress paying adjusted conversion, $XX.X was the over us the our our our increase period. funds we points operating eight positive to year business expenses the of the value, operating for income. million, over retention adjusted pleased we're with revenue, our of the target increased for were means year and retention, quarter, in most As last After contributor consistent XXX and Across growth. scale subscription over income were adjusted operating dollars, quarter an expenses more of of invest compounding margin this these third reinvest proposition, drive to operating of adjusted target. business to XX%. at our last continued cost paves a within veterinary in delivered our near With at the while margin adjusted marking expenses, income XX.X%, mind, of this prior In to in our and of operating our

operating of margin increase Adjusted our and year business have in income million. profiles our than services revenue this the the Turning other enrolled comprised to increase prior a briefly segment $X.X from reflecting the approximately and Compared was other quarter, different which for that within total XX% is to an segment. subscription million. products pets an was revenue generally of component $XX.X segment, is year-over-year, BXB business,

our While and business other and fixed low data margin, scale provides expenses.

we acquisition provided In within core of the no our virtually segment business. a addition, span growth profit in can reinvest incur then the we small

result, which up million, prior $XX.X is a our income year adjusted the over quarter. was As operating total XX%

I Our which momentarily. discuss was more detail loss million, will in $X.X net

or quarter, for costs of pet an $XX.X the XX% XX% This pets. average pet. year-over-year single acquisition During of rate return estimated at new million internal we subscription $XXX acquire in resulted to approximately a a XX,XXX invested more

deepen in acquisition and our new XXXX. an to balance year-over-year. Depreciation the to projection resulted million software pre-revenue our included we $X expand million, international and are also initiatives in $X.X million Given in our the amortization million, from to market. were in these addressable year we're was product compensation of expect These an adjusted increase assets and EBITDA and our compensation investments sheet quarter. increase $X.X stock-based This and quarter. are investing strong and quarter in first the $X.X modes to quarter $X.X amortization $X.X Long-term, in expansion. was scale, our the expense as development million months nine they per development Total of of the in million of $X with million of was the due year. $X.X in line compared million fourth $X.X million of This prior primarily stock-based in

net increased basic compared or in of share result, of a loss $X.XX million discussed a net diluted compared basic a loss $X.XX On and or $X.X prior year-over-year I compensation loss investment the million flow turn year-over-year I'll $X.X of impacted reflects net development was by impacted $X.X cash initiatives to As million decrease operating $X.XX earlier. the our loss in increased Operating accelerated now for a depreciation flow cash loss quarter. diluted loss the period. $X.X by and $X.XX. and net to basis, in year was for and and flow. stock-based growth cash to The a million the pet share amortization in prior year

We year The our product to during capital million expenditure the software, by compared initiatives. $X.X million increased period, primarily the $X.X totaling increased is have prior experience quarter. to our capital related expenditures member in new and investment driving also

the account As full a we cash result, which At our year debt. for $XXX turn updating no year-to-date investments to was the I'll flow outlook we free quarter performance. $X.X quarter and in of are million cash for in now end, over million. XXXX, to held our

to midpoint. $XXX range growth our to for year Subscription million, million, $XXX million in range $XXX XX% representing year-over-year revenue We is representing at the at full expected XX% total be at of to year-over-year growth the the are increasing the revenue million $XXX midpoint.

most the $XX to million, around acquisition XX% or adjusted pets our to our metric, invest targeted rates we $XX XX% million of a expectations return, subscription approximately is At in this operating $XX we're cost year. year-over-year acquiring business. this next pet our increasing income, within which results of capital Turning expect growth in million, internal more of important $XXX. over prior Of to our

earlier. to the are initiatives between full please Canadian rate fluctuations mind $X expect to revenue conversion we For that our million and keep currencies. subject development discussed XXXX, year $X the continue to million Also, on projections spend U.S. to in

I full for used the to which was speak that. it upcoming our to the projections, our Darryl With you at you Guggenheim at my approximate at I first guidance, been October. It's forward your to mind, back meeting the and you XX% Darryl. year to great hope and time For that be in in an rate Animal December hand there. on many of with Summit look more end rate With Thank conversion Health call earnings I'll we of on today. I of will Trupanion over speaking Xth. conferences.

Darryl Rawlings

Thanks Drew. call questions We'll for open up momentarily. the

income you Before includes and remind the Year-to-date claims, Trish's that legal I'll a are XX-month international, execution also available including including purview and and contact Margie center, product off offerings. start. areas channel year-over-year. today's flying Under product, are IT, to operations, areas and can plan that we on so, answer XX-months of is purview people up distribution, our acquisition, our operating and finance, do Trish plan. of on and growth, is actuarial. call XX% all Margie's adjusted pet of our new regulatory, I'll all questions operations, reinforce

for our and plan, With be the in the we reported our the performance. execution. me confident target to be I'm and with direction to out Margie in as doesn't need every we XX% With Trisha one quarter as strong happy laid wheel, our at XX-month just

call With XXXX. that, I vision As for strategy we'll on and now our focus will continue culture to the beyond questions. open CEO, up and long-term our

Operator

Thank you.

Please from Instructions] question be now a [Operator is Ripps with session. Our first Maria will Canaccord. conducting proceed. We question-and-answer

Maria Ripps

congrats and for new role. your thanks my Drew on questions and taking Great

had So, how us really there you it have seems seeing share sort quarter about anything like retention. a strong the quick can initiative? just from And during with early quarter? Can any Or I various you lead this follow-up. another you about elite is then there? with it performed of still Are is channels your you program? sort of new contribution And talk

Margi Tooth

Hi, Margi here. Maria, it's

roadmap. been strong with this, based segmenting retention retention our is kicked XX down has I start-off having know, really team you to on for last areas the Much their the as initiatives targeting a specific investing and months and whereby we've business, just journey. retention, many on our doubling very think with So, really the strong gear high of is into where a of they're like member and in

So, from the sure give rate making the and and as ultimately, the the perspective, in get contact thinking member a operations first we're throughout center to first rate a renewal, working we year adding with value team we're to Tricia about cycle then experience.

and of that directly this that which comes by make are, refer the then retention to way high to as can it, of in they us that creates the that this they're are, hard of into them the channels to retention the We if dovetails are to that and a as way and with that it's a more perspective. we the that I testament they're of retention at stage, teams allows the the At All changes they all well veterinarian their more we've just continue from to get team. and needle at pay think, look deploying to channel. is then channels move fact the tactics to as time to help talked how approach Overall, to rates performing. continue incremental do really really down sophisticated kind that kind the checkout, do about flywheel member we particularly performing experience friends,

of it, in of still too moment, you this takes the developing the is test while give needs, terms but it's in we're able In at making it an time. update the particularly early but -- -- is mode. coming any It ramped impact get to up, all to It a progress we'll be say, little new speak quarters. we're to

Maria Ripps

talked within maybe business sustaining? of just Is in several the there still long your And it. how are other can elevated I this pets sort And what's Trupanion. anticipate that sort other We Got and growth of book talk of do helpful. there best main to very driving here? past, newer secondly, segment? know you allocating about sort continued you growth driver revenue the about in businesses of in That's think strength you

Darryl Rawlings

is We our into Well, BXB mentioned X.X%. of year the and lower it addition out, operating is will other that business, in the margin it acquisition kind contributed much as software it last X.X% adjusted business. approach. profits In Last have year, pointed into instead it's -- and you where the about this income, we're that this a remarks, of market Drew direct-to-consumer group do about it's also projecting opening his of our of aggregate, now. year, go is contribute and revenue a

So, but we're see and to after, just really pleased year with how the progress nicely. the year and next ramps grow hopefully it we'll continues

Maria Ripps

Got much. it. Thank so you

Operator

with Piper comes next Barnidge John Our from Sandler. Please question proceed.

John Barnidge

and you on the congrats Thank quarter.

the the in given weighted benefits for alliance thinking be how really Aflac-Trupanion heavily term? towards near-term enrollment, channel quarters channel should and we that about open With longer fourth being broker

Margi Tooth

it's John, Margi. Hi,

more those to about this in So, and colleagues too. bit pass speak I'll a little a kickoff second my to

terms Aflac-Trupanion So, going progress XXXX. market really as the with working reminder, year the strategic of really, to developing which our on them benefits going to market we entry point, We alliance, in anticipate well-aligned channel. XXXX, the for this in past work in is We've in anticipate through a partner. any been didn't

be we rollout, QX there perspective. any hit about think And So, year impact an you do from won't XXXX. the to in when this would something expect revenue

going is to anything be to there that? year. care excited Anyone really well, to next So, the well with launching terms team and working that in progress channel of add

Darryl Rawlings

add. to Nothing

John Barnidge

over quarter, the subscription lower question, follow-up to that but the still toward it rather that a developed the million, within range, drove revenue then quarter $XXX.X that? the in end. Was And anything there

Tricia Plouf

in terms thing than ARPU one of for quarter is little Tricia. in coming lower would is this This point John. I enrollments. prior Overall us strong is a quarters. quarter out The Hi,

increases So XXX,XXX we well about High foreign that's about think driving as it currency. few ARPU overall. from impact as level when

and in quarter model. we're future, This a as cost is, would the a thing highlight one I the reminder, plus

for we're a has about cost cost the only and pet up full points proposition, to XX numbers our picture up, on. of up of of a for value pricing ARPU invoices, basis, so that goods. just the not at well, is on for you in context, breed always doing When so, veterinary granular some at looking can led the by XX% XXXX but see projecting been of X.X%, And level on our basis look of and our big for invoices we adding book consolidated at our we're our margin ARPU which going going also a to increases in per cost year and full go regions, top we've ahead basis veterinary on our been year our business, the X.X% full year, the

good level, high we about a pricing. on So feel

our we always overpriced particular possible where a as are we And true closer other are we that. prices. we're to certain were or to ahead the as those XX% scenes, a like where granular regions, and little region have costs raising Now, ARPU regions, and of because have we decreasing slightly behind proposition going trying value up actually to be

endeavoring So, be always as we're possible. to granular as

that's our those customers when X%. level, been pretty at small base normal the the our QX, a not pretty basis, year we've insured how at visiting overall, Now so data seeing on year in last dramatic amount blip our we invoices that look differences average seeing on outside veterinarian, a frequency are client veterinarian. with when dollar of and look is level, visiting the we often normal up And of how this going the macro

pretty so our been year client far going well. least up at base, normal as it's this So

are gets data of really what in -- pricing, on little that, and update going and and will that answer ARPU of continue we're things bit top line of, main the mix kind the kind in that's stay of the other obviously we within driver. but we're to But how monitor my it a that back we on and as needed. So staying our point to of long staying seeing with to up seeing that's

John Barnidge

Thank you. Very helpful.

Operator

with from next Shanker Our question Bank is America. proceed. of Josh Please

Josh Shanker

Thank Best Obviously, play growth attract very of you something some similar Pets a guess. the bit other basis which What talk is it, is best, learnings on you say to the impressive. very little unit can I about marketing there from the it's much. there Can Best that compete Obviously, a Furkin, risk? is transition using pet should strategies quite how you have category, economics also would that to take I that their customers? different mostly of cannibalization as yours. than Business? But Is and launch going to approach? may there's out? with sort Pets And you

Darryl Rawlings

too on there's convert lot much how of their particularly able our partners' live to are calls, people details into are differentiated that on but they're ways getting Well, don't businesses, a get of leads and we where them.

And our that's our about and give our segment overall income out channels our proven think I as our charge seeing and growth income strategies are more subscription details to shows to adjusted we're discretionary is and in can both budget and you a make for operating sense. I means disposable it to in are I playing think the segment. other growth other revenue, well the needing makes veterinarians insurance macro, easier you. people's lot which of our them getting much But our in by businesses and

Josh Shanker

add alongside Best you Pets happily Furkin can Can one whether and exist another?

Darryl Rawlings

Well, there's over XX brands in the marketplace.

don't And those is two So Canada. brands think or XX, between significant. XX, only the XX currently in difference I having are

Josh Shanker

map period you rate investment the to elevated of this level the allows investments business. on wanted Aflac about of in suppose? be things Are if do, or of expect I spend company you elevated sort you're then to think a through future when do we the you investing out And run we we coming Can some to It your but at spend? your make that money in always long in. the

Darryl Rawlings

on the spend or question on on an Is acquiring development elevated pet? elevated spend

Josh Shanker

I mean, normal... both. wondering up converge interested ramped compared with in does trajectory I'm to were they expenses might seem little if the variable a like I and I'm bit It guess, the

Darryl Rawlings

got Yes, it.

and up a So about of expect And variable general, over our in points. our fixed to we little scale up of years. expenses show were XX next the combined, couple see would bit basis

working our investing increase And and as been number margin priority in point customer mentioned on with more based we're pricing. adjusted earlier, have on in on a operating our income had before expansion. our experience one XX our Trish is we and basis that. pleased We that expansion But margin retention

Tricia Plouf

as And John, can in greenfield market grow terms and a of growing well, seen. investments the as get lot has elevation underpenetrated of an we've business and the we to continue add just I space

So anytime continue as within from XX% guardrails, we we're XX% always don't think IRR. our testing slowdown We'll can. And soon. a as long I to as to there's as growth perspective, down it will spend much

Josh Shanker

Thanks all for Okay. the answers.

Operator

Our from is next Autonomous question Ryan Please Research. proceed. with Tunis

Ryan Tunis

thanks. Hey,

Just we've level that ARPU bit a seen. what a growth on lower in the coming follow-up little

purely by or to like just little want haven't Is breed. changed maybe You the into I -- way to that the mentioned, the drill like could do it? you like that of sure that of had breed bit to think rate inflation or it something you are with kind more. Is you right make brands they just hoping fewer mix, that a interpret

Tricia Plouf

of rate little and a And actually we're that can that evolve. at well and cost are lower. on due mentioned, as some is and different key and seeing needed regional time that we as things The main a mix, we mean, our bigger, seen mean is I mix of on in our more different to to and that certain level. seeing periods rate some regions. can I has us increases improve distribution with places well. as continue for mix go there's comes the all just is invoices XX% footprint, needed you've the data with of do that increases our into footprint different to regional I that metrics based are There like depending the bit, channels, as Yes, where of over that grow lot general,

so us that aggregate the Success go loss a does itself And really in is really into of to XX% lot ratio. play. for as manifest and things there's detail how in different that hitting

Darryl Rawlings

I areas to we've get in XX% the and And Ryan, and priced lifetime good values that value I'd grow just I'm know proposition the closest business. as to have fastest we where add our seeing IRRs.

-- don't where and we our price the mix. so as contributes to And grow to fastest where have as we much move that

Ryan Tunis

impacting guess, see been when you, places also you concerns Got things headlines or to about you think general but it. bother inflation terms there have invoice. of is And I could obviously, like does be those that you and that, inflation, extent what what how might that like impacting broadly, in currently? be about that think where that affecting are the Darryl, just some I

Darryl Rawlings

frequency pets, going and to where invoice Well, talk what's the I we're a think, X,XXX. as there's two the at the average invoice seeing earlier, pricing, category, we're up Trish about spend amounts is, things sometimes dollar about talk about in average we're And One X,XXX mentioned total the X%. when for average headlines there. for spend what's looking

we and or lot two we veterinarians is to you front that veterinarians amount house. hard as on that in graduating ago, a more. about technician, it of X.XX% veterinarian house And working categories very don't think has veterinarians demanding need and The and we of or a expansion the in the is really way. that know important average this of to very in is the more that been are it's that now normal, think the a several their XX more is demand for standpoint, earlier challenge we've making is it And underlying monitor cost a it. or been update charge from Tricia's our with purview our for the to need is We in over pricing charging for debt. and the It progress all the increases quickly, the and she the good granular years, proof our years, for more injured. that's back accurate I do think services. charge university job need a described From so up years a a if is of suddenly timely, very basically margin we and way And product. mean, flat. on So it's we basis, our people across and macro actually But more -- of need not that average it's challenge scary. we become pets sick the same under frequency that it running has our

Ryan Tunis

Thanks.

Operator

Evercore Lee [Operator Our Jean with Instructions] Please ISI. question is proceed. next from

Jean Lee

to be up Do think like be would all? the over implication like But a gross if retention kind longer-term. for -- your through to years, maintain retention healthy able the think, the pace you your could what this would and Thanks. and to at rate or question, kind impact belabor point adds at to apologize -- And point, next pass of the again. over go they more like increase? to you'll thanks would should like of costs this that several level if it you Hey, of

Margi Tooth

and as So perspective, been solving bigger the think I point, increase in a in especially way demand need there's care, services off heavily over so with the for vet the can of Darryl's felt last you a if is few And of that go, I a vet and the demand more our member kick retention that see we're to with products, best problem. more none can months, done when directly. has more industry the I

where and is granular monthly right, of data to is the retention to the the invoiced specific goods at The priced the we're appropriately at all. the of cost impacted that not retention see that best cost as the point rates look we value rates looking specific a as based in level. is member appropriately, of priced We So, at at proposition for area we're well the pet. retention on the obviously, and

long paying. granularity as confident continue especially we're into details and are, should as at as strong retention remaining members each we really with of rates they and those dice it our as today. get what We're very data in So be the of looking of slice to the level

is the we really sure to cost gap we And as again of data the terms expect get one pace, general a appropriately. thing, I'm reinforce our about, okay, helping cost point to get and would board pricing but detailed, and think to started the making we're In in way at really that of same across through goods, we healthy value proposition.

when is by at So, consistent that changing. we is very retention today, you don't pattern it geography, region, at see look state by and consistent any by The we don't appropriate in the our And by price we see look neighborhood, when there we market, market by issues. growth strong.

Tricia Plouf

this increasing that we're while, Yes, historically, have for around, our and really reemphasize get on impacts the said, to through If we stay well of or delayed we do it do don't dramatic so. to one can see these the and of the don't see adjustments they're you do we to we've as top impacts I and this retention whipsaw being is If well this which we issues to as it, the you the moving our you're trends, you're the monitoring of done results, when size and that we've team, retention increased is, can you because better we're we the plan the well, as and filing rate frequency see needed. that opposed if working on granularity Margi do thing top shouldn't side. shouldn't just so on to top you we pricing do on always staying we get would on retention. and is need right focus that and the of it this and When delayed is on or customers key XX-month then key dramatic team from you continuing to

Jean Lee

the for you answer. Thank Great.

Operator

Securities. with is David Our proceed. next from Guggenheim question Please Westenberg

Unidentified Analyst

for is who question. part say you. pet Dave. This recently. is a insurance owns on is the a you company taking equity hospital Thanks or you that second And a largest private Do my one-off the group, for good this health saw trend? acquired animal John industry? would of firm for owning Thank consolidators We insurance Hi. pet think

Darryl Rawlings

of to greater would to expect over number the We next XX or years even see Yes. entrants. XX level same new the years

last about some XX the competed over company, cases, XX brands with plus XX So can brands. underwriters. some type tend In and partnerships have in channel. XX agreement ownership years, today they either to be The we've or there's you by have owned of groups, some marketplace, marketing against the brands that

veterinarians, best From but offering our leads, we're the national best helps all of rate. not I if proposition only on force customer which we've conversion makes perspective, think sales sense. on the got experience, value the and a those with calling business retention models

to I think who we're not entrants new be predict, matter well positioned to going and is in marketplace much. hard really the doesn't to it's or us the too

Unidentified Analyst

Great. Thank you.

Operator

from with is Stifel. proceed. Please Our next question Jon Block

Unidentified Analyst

to that Thanks This be Thanks. Great. Tom of launch? the willing just start on is fully John. the in off timing to Any on Furkin. And early US Stephan share? for and then Canada just on the questions, you'd learnings for Direct PHI

Margi Tooth

Yes.

back them. for days launched Direct through in and Furkin were PHI quarter, the So middle early really of it's the

with for positive with growth, think that the which like the sign adopted been way is in very products market, happy lead I them. things they've need as good we're can and

market clear being Direct proposition between the it best reminder, the create coverage conversion it's introduced where that difference When what prop. feel we to to market to lanes of three high the point being the of proposition, far. being Those as conversion swim As Trupanion different the the rates, go them US cost, we've the to mid-cost happy Furkin PHI we've and strong value products the so We've really reason we'll clarity with get on highest rates. I really the with types ready seen, and We're points working value a seen three and low and is lead said bring volume. value being available. we

by things sort that launched focused the necessary disrupting products. that we one we've see of and can and these -- the really business is the of we've performance we and of without it maintain on growth two launching how core products I the two intuitive. XX-month plan thing products biggest a that two that PHI the think is are first our of the I Furkin

all, job is our final the a board XX-month we So, us any which me into disruption launching teams I'm two and broader. market say without real, plan phase the to pleased the really the across positivity did of let products fantastic in next at move these for as that

Unidentified Analyst

Great. on the sort leads any in increasing guardrails? rate you XXXX, quickly but a then XX% maybe or XXXX? a still gross those sequentially pace. guys got the And IRR, your to in adds, And of ability I iOS at impacts of conversion the guess, or Can maybe That's Thanks. changes, Apple conviction within accelerating the staying helpful. kind subscription to grow And experiencing? talk two-parter, just throughout that not been, then to they've while you XX an modest fairly to maybe

Tricia Plouf

Yes.

actually we ARPU, anything when everybody the change see was. didn't were changes So major we anticipating

issues come teams could the ways potential and any rallied already up So there. solve with we that

deploying XX months, of of meant terms and tap as into funnels a In through volume, which we number on to fill that different we we've we've better of capital, could have the last gap. at that in this been we've able gone lot a got

and strongly rates the from rise well seeing as conversion board across our phone. to continued volume conversion really web as growth to has rates quarter-over-quarter So lead

changes and there anything anticipate there, line. down shouldn't the be further no So

we're really when happy we think to so guardrails, can of terms happy gross with over I target we've team within our increasing as market. been think always last In quite about the our that the to to XX%. I'm possibly few deploying much the more operating and ads, in that's subscription, capital, dramatically And fact XX is And as within way that grow the spend we the quarters.

and granular see team the more as grow? encouraged to we What mix. we cohort but within the channels, the can We we on the and data what we that new we quickly into And a refer growth can with are them our helpful start we rate How pet. going very, core to friend very with points also add team related get into by just that focus positive a see channels which as not whether is feel grow add XXXX. we related, them? grow ways it's can We we as about and new retention, for finding lead long can and conversion expand as keep very it's what

that momentum across and forward growth strong We board to the have looking seeing continue. really

Darryl Rawlings

net I'd mentioned operating our and think kind set we'll know, flat the growth perspective, which to by from of to adjusted income from XXXX, on in I is opening if remarks, revenue pet XX%-plus just XXXX you I see like my our grow level but got know an team a we But phenomenal have incredible XXXX. think a more than in lot lot our the growth. you know, And we'll is is things we've that. ambitious I I doing of going me plan, be to and of job into executing. want momentum year-over-year,

Unidentified Analyst

you. Very helpful. Thank

Operator

next is proceed. Please Raymond Wilbur Elliot James. with from Our question

Michael Parolari

Hi, guys. actually Michael This taking for Thanks for Parolari my questions. is Elliott. on

costs a talked a then your about these problems, overworked getting please? it. of on just key model might have permanent also sort step of of we bit if Appreciate or your higher And any technicians and guess, vet that's driving of the seen the impact that are about some tickets, talk costs are temporary? and that in the with can business shortage I capacity kind So the like that little inflation of as other talk you about business more the items just earlier, but up or that

Tricia Plouf

this increase can we're now, on seeing others mean, invoices, we're overall, costs I year can Michael, I X%. Sure, wise pet right about start cost on like that and we the seeing chime ticket in, those mentioned earlier, average

the and So that help is veterinarians our of, in pet. In we to are take business can advantage line so general, what created owners that designed pet model any expect. would with procedures

And to higher so. those We've costs, job veterinarians we is higher and encourage, continue our levels that we and staffs, and done price pretty salaries we'll and medicine, of to jobs like -- that their appropriately. do encourage to And that well. continue, monitor so

if others know encourage want staff. on we So, that. the I don’t comment to

Darryl Rawlings

I this. we many, markets and have kind North many across give America. to just But an regions on us of example mean,

were has accurately our greater And growth where is to You rate previous went than our priced know, up inflation year-over-year, and We XX%. approximately XX%, year-over-year. gone the XX% rates a the keeping veterinary year, up we have city proposition. value

up across are retention market. and leads and that rates in board conversion Our the

of points very on inflation as very be history good for have that And So it's But have have to do. that's rates and mentioned business. and we if of And our we granularly. And greater it's cohorts our it. we that's monitor many before, business. for many closely Trish will say we good to what

Margi Tooth

able the to perspective, fun desktop, partner having is whether team that to care they conversations with our a in the give there They the the support we need just just the here to to them bats went And need. We they from there the themselves to they to the is pets, them. that they that's they territory right treat in start to is need well, practice board and deep them it's help thing, their and that be technicians, support we're And the by in problems, shortage, have but to they not And to into from And the it. when do pets their no problem can ways. the business, I care was partners, treat a do get that's understand And that we're for solving have the pets, everybody. need both across have need field as order what. we're people when a technicians, business perspective. capacity care would And the many get field got the those for need need it. relationships matter the that

them. growth with we've hospital into the kept demand in that -- seeing that value seeing our maintaining the because less We're We're up problem on they're point pace. proposition. the on that in that that areas a continue Darryl's where solving we're So, of directly, they're

as we can support purpose. is encourage much support will and So here business for to them we the that as do, our industry

Michael Parolari

Got it. guys. That's Thanks helpful.

Operator

question Gibas proceed. Greg is with Northland from Our Securities. Please next

Greg Gibas

increases? afternoon. the Great. X% low increased perhaps on year-over-year the quick congrats follow-up those the medium do Good see have With to ARPU the products you where Thanks promotion, once X% and the maybe questions, on trending a adoption Drew. new traditional to for relative taking blended products, seen ARPU

Tricia Plouf

have mean of crystal looking a of is business ball we're The that main the to we're income pricing to products? well, you I have increases thing to that our yes, overall. Greg, that to on deploy increasing hard operating in Margi, that revenue Hi, XX% as always it's as mix sure do so value make proposition those add anything terms can capital. we adjusted that and

Margi Tooth

I impact it's think consistent as what the adjusted early AOI I Trish profile is them. to us to mentioned, is of for know going But be. No, and mean that exactly is, the key on thing income too the operating all

actually the changes to products So add we naturally. adjust whether change we're subscription We'd the see expands. more are part new see with mix, mix we're PHI to grows ARPU the it's or the or business time through. that distribution we're Furkin we'll going new expect see else. channels, And business anything market of as through as as and It core reaching reaching mix coming

Greg Gibas

any ask if you had to I estimations nice or wanted can thoughts made updated progress And well great. TruTopia as Okay, this finally on you reach towards quarter. TruTopia? when

Margi Tooth

the I wish I answer Greg. that, to knew

member we've our the seen team a experience. out. rolling There's We've doing retention we're friend point to refer view. fantastic the see our being a trajectory. We've a you seeing Pet seen tactics mixture add a friend actually. tremendous are naturally And and rates year best that and we this of a think, on refer a lot remind I having honestly, that the possible the is again, We're of just is in when that from increase. churn TruTopia, offsetting progress of seen

it. to very making keep we're up ground. close think I We

that's of -- I in own from crystal I a Trish, headwind got that teams think when but it's ourselves sometimes. not far impressive. happy where I yet too that sure. like kind market giving are as going we We're growing -- retention think the we much quickly a we're ball, of away, keep can But And we're like kind perspective a I do and they I'm have through as don't it. our particularly haven't

Darryl Rawlings

look at it on book year years the almost business it's book two ago. And bigger even look you the more half basis, pet two it a our valuable gets, was just where friend I from the And a a that when Greg, if add becomes. and refer at

powerful part of So a the it's just flywheel.

Greg Gibas

it.\ Appreciate Great.

Operator

gentlemen, and end the and conference. session, reached of this the Ladies have will we question-and-answer today's conclude

time. this great for your much disconnect you have lines at your very participation day. may a You and Thank

Trupanion (TRUP) 4 Nov 212021 Q3 Earnings call transcript