TRUP - Earnings call transcript Q2 2022

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Operator

Greetings and welcome to the Trupanion Inc.

Second Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Laura Bainbridge, Investor Relations. you. Thank ahead. go Please

Laura Bainbridge

Chief welcome be Participating second Darryl on Margi of Chief Drew Executive and earnings call. to results Tricia today's for calls, Rawlings, XXXX the conference Officer; Plouf, Wolff, and President call. today's Officer Tooth, Officer. to afternoon Similar quarter prior will Trupanion's Operating financial Chief Financial available Good call portion are Q&A

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

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

Darryl Rawlings

Laura. Thanks, afternoon. was Good year-over-year. revenue QX up XX%

estimated million More pets our repurchasing about approximately income common operating invested adjusted acquiring our of additional million shares an basis. currency nearly XX% pets new we or invested the or expenses in XX% profits from XX% a internal $X importantly, stock. We million an growth grew before and constant of rate development return, $XX our on we at $X in earned existing

our our achieve amounts value we pets. are income investing of With to In areas strong our large key at available can to operating we balance over the quarter, market, sheet internal strength of adjusted and return in of compounding is where underpenetrated rates creation. XX,XXX of the high cash, we invest added our well the In new rates capitalized returns.

of these Trupanion. serving veterinarian are is out modest finally leads soft be elaborate. the we and also year-end. faster, how the partnerships and years about Growth and We're the see Chewy, rooftops brokers This up in their launched in to and from made have quarter, trust I'm larger the starting our over play most partners good for was driven up also For us placed and to prices shouting should it these out a news, is most context, raising notably time. to In the about But that in staff humbled data. progress excited I'll this we companies about improvement rolled after from is by that year-over-year conversion. very Aflac XX% veterinarians by what are internationally. but offerings XX% see excited for

begun increase claims. visits Earlier a or the an cost an course past number makes the to combination the per at our Over size and what to amount the veterinary and veterinary month up highlighted granular the of year, frequency frequency related monitoring dollar level. in inflation receiving. accident average In accelerated veterinarians of veterinary the so, visits pre-pandemic of or pet we extremely return also past in of illness. we've invoices we of size, been for year, illness charge of accidents we've see the and to The invoice are the or

years, for historical we're inflation overall the cost seeing twice increased members. X% approximately of care Trupanion to XX% or rate. XX approximately has that hospitals of to the X% many Today, For this last increased for X% veterinary the per veterinary year

least this range so for veterinarians years, at X will hope the medical appropriately of their X and can increase line continue the in to to XX% other and in paid professionals. be with to next and XX% expect We staff

our focused Doing adjusted pricing record not XX-year proposition. a and influence to ARPU pretty reported the important operating hitting at of shows important is our both It easy line is deliver. mix blend business More which will with remain need we're track note, Our is subscription all target than that value is to good to pets. continue and our income. that will in of our team for

that not people blended year. expect to are model XX% or a We saying should ARPU grow

pets a pets More worksite through enrolling lower veterinary lower parts mean with blended For ARPU. example, will costs from ARPU. world cats the of the More new of enrolling blended will a higher lower mean ARPU. blended mix a means lower

blended an Our simply is ARPU output.

effectively the and our measured margin. our operating compared our business XX% reason, to XX%. our to annual that adjusted quarter, be ability approximately operating can For the of target margin adjusted In was we operate should believe by

would and expansion model, margin half compression the we pet comes supporting momentarily. over in pet cost shows, allowable the disappointed. illness. care time additional the unique inflation. of perfectly will greater environment continued evidence the and us budget drives category. acquisition I be elaborate for is cost-plus and Short others. if higher more cost QX things I of exist. opportunity accurate find creates care believe always faster would are for also term, time, year, adjusted veterinary our I the lifetime This to and is accidents our more our Trupanion. I rising we owners to. ARPU of value a With of back a be why said; that don't As this rising an continue That expect nor margin to among than Drew to That operating need of don't cost a will And see on in in increasing expect solution help spend With we unexpected and exponentially better, them investment and

from growth of outpacing fact, care growth the benefited has veterinary Trupanion's owners' the pet In of of bank cost decades balances.

shelter, necessities are look agree that our and back the Now, health let's Parents human bare big the quality universally at picture. food, and pull little care love children. for a

veterinary less the up from X/X not for Already, pet prices majority of items is of the in believe from approximately reallocate care owners and have from than their step-up required. necessities our of accelerating. the us. this X% category over households day started of category children line make a same Last Said in necessitate X% way, its And historical veterinary were year. the of the annual bare pet health President, expectations, discretionary need to spend currently is existing XX% the in wallet. revenue, year, individual We call to owners owners the believe pet particular, opportunity over led pet for added feel million combination category before clothing to raise pet with have increase cost. a being $XXX members, to our basic owner's the in increase impact For and to would We of care about these like in I’ll if talk X-legged of hopes ahead pet growth. Margi? turn Trupanion’s of pet Margi, up with now Trupanion significant could spend a $XXX needs. the pet XX% my If this to and prior adding the million owner's more monthly Trupanion about share spend. veterinarians another doggy their specifically the

Margi Tooth

Darryl's are difference. commentary duty veterinarians ensure when unexpected tired trusted overweight, of increasing stressed, will fact is We on burdened environment with in The economic happens But to much prices. to why pet we this costs. rising of ever world have inflation Trupanion, exacerbates in raise good to we and and Darryl we have budget our the take moment trusted not trying solve. owner higher. a of to point on And The increase difficult opportunity And want low. times the partnership the signs Couple everyone. starting is Thank the I you, underpenetrated be we, elaborate and been for in faced that the large are our average today, problem afternoon, critical a that prepared than and more of veterinarians unexpected parents teams only market. make need afford to rising There veterinarians unexpected with the times. and those come care, to care. able We're owners see step the majority uncertainty burnout. pet cost that to to in in with greater the something it with through threshold their partner are Today's veterinary with cannot than to of is this pet pressure struggling veterinarians make pets partners pushed are in economic provide data. care $X,XXX cost early inflationary even veterinary their veterinary this to of for use stewards still enough. a backdrop and more be an Asia before, for mounting more to rising of the of that this it's to our one to for those Today, around need

of veterinarians future. today, we start to As help proposition than able to pet walk To a the years, life ever. cost monthly affordable relevant is pet. the for pet for by our let the at birthday. members through the the monthly XX%. of we pet veterinary by into Darryl Because how more in increase be We bills in The pricing X few globally. care offer XX% need in With make prices in to our moment raise me next age had to to unique is coverage. their adapt breaking it with, are you player only lifetime unbudgeted budget to. because backdrop, take can the a can as going to unexpected unique owners they will our the cost their of of veterinary parents bills afford for industry of small payments A this a noted, cost the fewer aggregate to the are enrollment, doesn't X This value

for unmatched directly raise in our ending understand other actuaries do, data ahead Moreover, our best means local any us Pet player vet positions need the XX-plus and will veterinary are of their years reimbursement. the end we paying prices partners, support of how the industry. As owners territory vertical must to they an which of integration reimbursement. through team

Our insurance not decision, never a for waiting does has should leave High-quality relevant. solution Trupanion been not. more you

these more last coverage our practice financial in over toll days of to card comparable payments ever year XXX XX/X, estimates operate to emotional mission. and best continue quicker We constraints. approval XX% unlucky directly credit Through there to up no forced to want are finally, We removing offer to before, remain And for paying enabling card. be decisions heart-wrenching pets. the payments. the We directly seconds hospitals not of both majority we to, than Year-to-date, had high-quality to invoice medicine, more and and model, to fees dollars were change spent year. more of able to the we if a than the that The veterinarians in by will steadfast empower lucky for veterinary a and of like of pet medical the sustainable credit educate pet time total veterinarians lifetime paradigm them on business businesses, forever. and Drew? paid the pet health are reach our are offer a owners for veterinarians or

Drew Wolff

Monthly business, Today, everyone. tracking up goals. XX.XX% pets a average and share how was increase average subscription revenue quarter afternoon, calculated we're our by sustained per $XXX.X mix additional period. On thoughts the basis, monthly constant trailing against performance basis, XX-month an last typical the monthly XX% revenue is we've life year. of XXX,XXX of Total discussed. increased been revenue $XXX.X other X.X% U.S. levels segment, was retention subscription retention impact. have continued I'll a XX% and in over increased some year-over-year. XX% dynamics year-over-year pet rate of high over Margi of foreign business. well on our Total as Within per revenue year pets. our growth along X.X% business QX subscription equating would to details a revenue driven the months. prior XX our be compared life continues was On up currency as subscription within impacted to $XXX.X basis, average $XX.XX, to an the for annual to Average In Thanks, This in good of is strong was than months Canadian or additions that business million. to with constant year-over-year around on larger the and exchange average enrolled quarter, an our year-over-year, by which pet share currency a million, pet million, XX.XX% XX previously had

expanded ratio from quarter prior to points XXX loss XX.X%. basis Our the

larger occurring expected, the the of this same While I'll is than in level result all quarter. of some variability factors and X explain. typical is move

First, frequency the shareholder as loss we've meeting. of discussed largest our at ratio, the driver in was the increase

new claims. point costs for Darryl's half higher year quarter, cost the the on up of we elaborating on claims uptick we the as in as had business an that will Secondly, at finally, regarding in we staff timing, And the processing of yield bring continued we expansion of saw efficiencies to business. end back severity

extremely to adjust to granular order data monitor needed margins. hit an pricing at continue will in We level our target as and

in continued product of As experience, subscription X.X% were investments the a staffing percentage quarter, of advance additional in expenses including new member launches. revenue, variable in our reflecting

these investments Fixed fixed now actively After income. Nonetheless, operating of to our actions we our in We in cost in expenses the market. revenue. to are offset XX.X% invoices, adjusted were leverage operating expenses quarter, QX, from Relative our expect to expenses, margin and the operating leverage paying that year pre-revenue calculate increase adjusted the variable of veterinary subscription to XX.X% X.X% took down the was partially we drive the prior loss ratio. in period. we

foreign to XX% change income quarter. QX increase by in drive and impacted We actions, in delivered currency additional million, income current pricing approximately expansion adjusted continue of our QX year-over-year year dollars, period. operating business rates expect both an veterinary operating on range to $XXX,XXX QX The XX%. $XX.X in to of the push subscription monitor through based to of subscription inflation. In over adjusted cost margin, prior of inflation the sequential in XX% in aforementioned we in With and operating and adjusted are working the

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

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

are plan. will variability I more target this outlined the While in running annual quarter-to-quarter, momentarily. XX-month behind XX% do discuss some our growth we we expect

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

to non-capitalized international growth new invested are additional the expect costs in add pre-revenue, long-term and expansion quarter related will which levers. also We $X on These development costs. we products, channels million

reflecting percent of as a ahead Chewy investment. product XX in recent as QX, international expense offering activity launches quarters, and some step-up a the basis of from additional As revenue, was well development points Aflac

adjusted market expense compared expect year line gain development to expectations. $X.X with we loss compensation year to an million, in $X.X the that EBITDA million quarter. in end. million of prior drive of $X.X totaled $X.X in in expense back EBITDA in This Now with was the quarter. stock-based resulted revenue million are towards adjusted an Interest our products, by we expense of Total X.X% these

in $X.X stock We million common our approximately also quarter. repurchased the in

can seek includes during to a This of As intrinsic stock where market we where our own attractive will estimated invest periods to discount disciplined deep opportunities allocators value. we valuation we believe returns. our find repurchasing reflects capital,

our in growth always needs balancing We with will do a manner, projections. prudent our so capital

loss share a per As and loss basic net prior or share to diluted a in per the or diluted and a loss a $X.XX of of basic $X.X result, compared was period. year million loss $XX.X net million of $X.XX

our balance cash facility. of our last end over long-term with in We to short-term which investments approximately the million million $XX with from ended $XX Turning and under cash, $XXX available year. quarter credit in sheet. the million million approximately the is debt $XXX equivalents at held up We

comfortably fund is when to M&A compelling. pursue flexibility strength balance the several repurchase accelerated opportunity growth we also we sheet, With believe strategic our or of shares years believe we can while maintaining the of

flow quarter in was Capital the year of $X.X a was negative $X.X $X.X and totaled million compared million $X.X In million the million. the cash a cash prior expenditures quarter in period. flow result, cash in terms flow, negative operating free as negative to

year-over-year our the year income. XX-month As XX%. to expect we plan, income the operating to grow in growth this grew year. goal income XX% Last XX% is plan, highlighted first adjusted our our in operating of to range it adjusted operating XX% of XX-month adjusted deliver in for Currently, year,

of of we right need backdrop cost growing America, be target. adjusted XX% This in additional rising for care, remains distribution operating growth in XXXX goal XXXX. North international the continue the With believe expansion, for through channels, products Trupanion and to our income will

Now, to Darryl. back I’ll it hand over

Darryl Rawlings

for a numbers, the execution. quarter was it mixed By

affair sentiment, love As public and tough. thousands at when I during is in But the believe times with and large I've current And execution our stand make retention the it of underpenetrated that, value invest market, and pet our said of us lifetime X-legged from high uncertainty family inflation a of members, I for companies our out open and can questions. market I'll one look with crowd. before, given up

Operator

John Instructions] from first question of [Operator Our Piper coming is Sandler. Barnidge today

John Barnidge

I I target of points the to And of talk the scale basis I came about margin in ratio know, ratio. that the economies to Drew, AOI wanted getting talked in know loss to the you quarter. for above elevation offset XXX But loss some talked about about have down XX% fourth maybe you subscription had XX% the about XX%. some

back expecting XX% So to target. close again? exit that circle to to you ‘XX I to wanted XQ Are

Drew Wolff

closer we're operating to XX% with get adjusted produce to variable that Yes, XX% to adjustment to across and margin. expecting additional expense loss cost action fixed XX%

John Barnidge

a clinics, what in Okay. curbside please? ago was And then vet quarter versus

Drew Wolff

Could again? you repeat that

John Barnidge

What a maybe hospitals you’re in a those percent at year talk only Can you vet have clinics certain your only I of versus that Yes; know that so decided or to curbside about keep dynamic vet or remained quarter post-pandemic even maybe software? practices world. have curbside ago? that a ago a in clinics. vet that’s

Margi Tooth

Margi. this is John,

hospitals all an still see -- definitely markets. across Curbside So our it of is across evidence we

what in processes the to exception workflow it's high-quality patents have opportunity And from times rule, more the insurance. introduction talk than as with we've the make now adapted than the bring obviously, seen their can of their ago. the sure year hospitals certainly have medical to So a about

vet haven't as curbside you an our people been will have portal, is increase We seen tell, referring now leveraging software, number I we in the increasing. is What it to our of recently.

went the throughout up year-over-year. quarter Our XX% utilization rate

more now So often adopting only so this as getting curbside rules we're I this much taking before. back the more into they're exception it, of And with like hospital than bets they using opposed people very were stage. the to is are it said, at seeing less it, not an software

Darryl Rawlings

bigger that, affected Now, thing often add diminished. is the one walk part our Curbside is And and as that us benefit pet the partners. John. to for through company. said, a able just the one to owners. that's able Margi into they're territory to not that's been thing on And now big largely to We're doors The walk hospitals.

John Barnidge

in question, monthly higher higher wake are I any Are inflation of monthly choosing you maybe move lower can. one from last to seeing And lower ARPU? the that sign to deductible, deductible ARPU insurers if maybe

Margi Tooth

our that trend for start We've looking actually to basis. certainly a board can we on across regular the always to I and add everything deductible want see very others as it. at been

is that phone throughout Our that quarter, the just lower are to about deductibles on that deductible of there. taking which been the seen through have so trending QX actually deductible means down. questioned both you coming high We've contrary back QX; and into web end the obviously a people

are seeing value. people the So

that down. we’ve or is said markets very And there point different As is people our difference value across deductible using no coming sensitive. channels are before

Operator

coming from Khajuria Evercore ISI. The of question Shweta next is

Shweta Khajuria

Okay.

please. couple, a try me Let

in the guidance included is adjusted of rate what operating growth income cost. terms So the

about expectations, how incremental contribution in So And year loss in the as from is bit of down it as the back growth ratio, then et products a could channels. you partnership it the more? should, well of other terms whether Chewy and investments, we break cetera? Just half think question contribution lower-priced little please your is, the from second this

Drew Wolff

produce ratio. guidance I'll some the embedded on taking action side expense board. get well target in and to variable off and second XX% additional – get our one. to on operating have scale back to as have XX%. to down. across in Sure. the our as towards on fixed will And to adjusted We’ll adjustment going loss revenue We're pricing action that’s work the on -- the the question start loss includes come then margin hand the first But

Margi Tooth

Okay. second And it's Margi. so then the question,

market In the that now overall lower disappointed pretty those products and so terms before, have we of from contribution general. PHI in in the right been in expressed of have half, with products everything progress second we've class that the products been

have I X are are for anything brands managers the X -- that X seeing significant half this general we've We got anticipate humbled products and more our and than say Darryl back year. his of that now half fact a Trupanion. partner be the were on with X I having honored There anticipate -- that growth of market remarks. of that in year the will the to We with trust of overall stages very responsible think prepared changed We single-digit the having we're the impact positioning able that. touched terms in the they've to in the don't by these We're these products. growth. of where overall Aflac back them in don't launched What a from Chewy very happy with early

the As a start to the in impact, albeit QX. product, anticipate those reminder, bulk But subscription revenue as see do rolled just early of we going QX impact through that seeing out get to some monthly we and as minimal coming stages. we're not

Operator

The America. Shanker of from Bank next question Josh is coming of

Josh Shanker

interactions? not? of what’s blip happened questions. in month. But clinics? whether the May – trend you a the is maybe trending But in or you about in face-to-face think go installation you on And during that threw a can So territory partners statistic was in mentioned going about XXX sort don't May. number How talk of one updating Meeting, is what’s in terms we that Shareholders I that continuing, installs the every of want whether with veterinarian the that software out Annual briefly to

Margi Tooth

Yes.

So it into on go continuing you're won't about But I same details trajectory. scale. We number, that that you continues can right, XXX tell Josh. to how has that

back that the So levels been happy in XXXX. back very seeing we've to at visits were that we have

which volume in understand has We're the drive to walk and the rate they relationships conversion to have checkout ground adopting to We seeing we which pricing helps locally the That we referred helped using a And the can seeing problems, than ever market. to time face-to-face high our a insurance and think only, team. our of a those a know just basis. at in the have that before. When turn more as high-quality veterinarian the it's But have remarks. a time reinforces is in an medical we our of information what software, leads which reinforces lead people PAC. use on increase helps now volume to need about paying also boost of It at that field and for our hospitals doors more be we that face also the does resolves had of inform a we means we higher has prepared so directly regular which in face. people that interaction, whether how of on as need, lot rekindle the there can have not it it more of just result in we we're efficient

together nicely. why kind come really that's start to of So we'll

happy of end to trend with QX. QX QX back That hospitals. been as get fact the that happening And well. we has been back we've the able into at very we're that continue maintained in So through to the see started

Darryl Rawlings

happy numbers, of general just and talk gives even seeing add that -- a partners, for that that territory some of I'll us it them and and points talking walk our door through level business the the have them back to having and for in has strong urgency of the veterinary the space acute in non-veteran all the And more real the with for in of inflation the creates being Yes. super been field. great

Josh Shanker

of you the efficacy XX% then of subscription doesn’t make to that of Investor the terms spend on some getting spend the pets. Relations cost that a much acquisition of great the customer And the growth where XX% at return? because suggests weakening? your Look, as are which look But do maybe just sense close acquisition XX% in to customer maybe if point can’t is get lower we of bound we is some spend ad get point at I at – marketing

Margi Tooth

So change quarter-over-quarter. IRR, it or XX% XX% and and that got we between doesn't

commented. at So we margin the you as through we still compression And think were when impact of quarter. XX% about that, the we

saw they're were adjusting team other So communicating we profile. for reacting each doing spend what their coming we and that through the with is

volume and So closer our Overall, we mark. are put it and to XX% the ever. the rates strong high. it’s when look bring The though, did is as channels it efficacy, strong, on pressure at it conversion

concerns So any there. we have don’t

Operator

coming Autonomous is from Research. Saki Katie question next The of

Katie Saki

rising Inflation sequentially. and your ARPU growing much is isn't

So through think get can XX% you why walk a you loss just you'll to ratio? back us

Tricia Plouf

Katie, can one. this ARPU I proposition, And Tricia. close talk we high it's is output as you financials about mentioned. mean what that on a consolidated XX% that pricing an an shows of like at output. Yes. is our to up can level, I value as this to

Now day-to-day level about this shareholder and at geography at the a I talked meeting.

We the frequently. updating geo, enrollment are at breed, very and constantly level, a looking Asia data neighborhood, at pricing granular

were receiving many XX% neighborhoods and regions that pricing increases than to in that higher some range, are have X% We the that.

target. ratio actually some are loss where running have Now below regions we our we

been so those And we've decreasing prices.

our And where is And that. that getting XX%. you flow we're on to is filter Drew hit of then the to So blend the that the targeting financials have XX%. us as target ARPU our to really through see of then mentioned,

some start in more that in past. now, than in invoices prices more than of the up were are some these to have but frequency Darryl we to that the invoice we increasing data not seeing size are as with only average not areas the in keep rising areas, costs, all. go we X on based see, months we up we Now areas, mentioned, ago But the

So at looking absolutely are level, never is be But at the we'll very more we key granular perfect. times for us multiple this month. a a

We a all proposition. have pricing value month them get pursue close times, changes single action our through going every about price sees X/X granular or to to book level our at of at

doing And that currently. we this then seeing period time. So well to pricing additional we have we're through that long -- feel to going a filings the reflect at for inflationary is been get us And we're looking as we've closer.

track absolutely And we feel that so move we may value while prop. close get on our can confident timing to back around

Katie Saki

a As like a channel, us running, you can Trupanion’s today headline looking in XX% the what with of rate say, follow-up, nationwide increases like idea to X% give rate? inflation an on vet are

Tricia Plouf

a at X.X%. first the X.X% we're year, and of macro is in seeing per claims is the up our mean, half going I pet ARPU Well, level, going up our

been we've a up between that a delta. good while doing -- need keeping doing we X% make been although we've timing job of about some quarters, So there's to up, variation

were I we're XX%. said, when our general, that certain is in increases rate the prices. X% vast majority blended as rate just and and the breeds between book with basis increases, decreasing on of It's seeing Now filing regions a offset

X in it, putting the over where years I'll the many the certain you that's get when at areas. onion rate through past we've and So to our closer blend. that But rate taken look also prices you we're, that value peel back expect proposition. decrease to some to we increases that regions say of we are get action larger in would the

of are at tail the We that. end

ARPU to a little those being a inflation to the on products we closer to really a If most not, add in you’re grow likely more these see It at we do. various a ARPU. our as being have that in value up to we regions would reset target blended as mentioned, as through now of as keeping a bit doesn't right the many future; is about decreases would reflect think it products as look that enabled which is as ARPU blended more basis. have really faster faster because But proposition what more better And start faster I so goes -- more to impact going it's vent-blended important grow a growing slower, well. rate into to mix the lower you'll to closer our metrics, opposed see thing with certain add. But or target So our to hypothetically, well. overall because that as geographies would

well Dell. here So is key of mix business as

Drew Wolff

We And of really start the blended of mean, ARPU can year. workplace it will my and I be. bunch in Katie, to will remarks, other half output. opening make be Yes. mentioned back impact the places It is a hope I what that an our in an

Some of expecting lower that were these ARPU.

what otherwise that’s So ability to execute. that you’ll our And look these expecting back we to And the see what margin at then on might we’re in half not that's year. to with the if our adjusted comments basis; it's expansion on see. matters and comments. here, may execute some you operating margin of see expect a well, in tracking is inflationary you What blended our

Operator

question of from Our Ripps today coming is Canaccord. next Maria

Maria Ripps

increase in obviously or If year years, to your members your retention? of for see care think we X that about years. think increase impacting to you next per XX% indeed do the going over compounds the vet you are prices cost to capacity over like-for-like How And I without said. XX% X

Darryl Rawlings

veterinarians to have And appropriately and to when payments. if it so we do pay going and we employees budgeted concerns Maria. to shareholder Well, we we that we and they increases slightly. happen. not we've letter. When and in degrade we've with it's XX% conversion rates see we're compared I'm into retention that rate their medical will. be the been certainly excited will tracking hoping XX%, care rates they to can remain the community can monthly professional. our pay see know it's XX been over know I'm that other veterinary years, the If happens. what doing members that year-over-year, hope seeing see to we guaranteeing afford this When that's But it And to our broken for I it to it XX%, XX% and same. for going it's the XX% over no And in said

Maria Ripps

your additional by then the very context And to are ezyVet, additional thousands software? other announced That's partnerships you integrate integration? able now what partnership guess could And maybe these from secondly, some of is software different with I provide being hang that this helpful. on hospitals core addressed the so is offering recently how on

Margi Tooth

Maria, this is Margi.

So the overall partnership platform with the ezyVet is essentially practice management a full their integration system. within within

of folks full And embedded. is migrated that does that that ago integration years have what didn't we a So Trupanion have. with we working been now And had ezyVet many to do historically. couple

we've have those Trupanion to do We with. worked quite cloud-based have ezyVet that software have historically of the as with access hospitals a members is. to well we lot members on-boarded that So as

us some time hospitals gives access it for a that are are to large and very So them have some of and partnered with new. long us

how when market, that hospitals. American penetration are one think awful access increasing rates our approach is gives the really and an of So ezyVet us North practice to management across we about our lot

profession with that So able it the and pay otherwise just much if ezyVet offer previously. they to veterinary can have solve they us directly really enables be problem solution a that very to and we the pay didn't them that had

it that are just already supportive hospitals reinvigorated those So us. of

Operator

Jon Our next question is of Block coming Stifel. from

Jon Block

for Maybe X me. just

on a then first XXXX or of and gross first past for for adds. just the so, like out, to in on of trend give I quarters half quarter X Just sort the sort to normalized XX,XXX want XX,XXX flattened adds somewhat the look has looks to back 'XX. take, it the XX,XXX gross or line

a call maybe subside puppies I or that of might to pandemic from, highs? from good your, sort kittens. pet adds that come adoptions anecdotal chatter be XX% amount, think of there's gross Darryl, it, XX% So or starting

in company, have that line your more that. I And forward, Just love inflecting thoughts want think as 'XX-'XX. really to that going importantly, on trend people a growth

think Investor while to about going that adhering XX% gross Relations? So how line your we XX% arguably forward, add do trend to

Darryl Rawlings

And I think look I which recurring I over about we if at; XXXX, revenue period and our to In Jon, a growth it of at And between 'XX, business. it going 'XX when XX% a then revenue, we're XX%. think 'XX how is monthly 'XX, total be XX% time, pets. were I and subscription get and our total our if about subscription looked pets 'XX, and it's XX%. rates grew to

a channels hold that as Now to veterinary partners retention company, new talked look these slower. with really through in additional well. I'm start our strong go internationally we make last we is that faster plan, in doing I sometimes 'XX, and launched monthly be about growth we for door. the walking and take the you're 'XX or have inflation revenue, But coming excited that 'XX, online, to couple an are will 'XX accelerating will into the we're will about and the only and In that driven QX. start QX expect recurring work out and XX-month not our faster, quarter by impact 'XX sometimes the territory when

operating end grew year, each XX-month that the 'XX. end year greater grow I we in a as look were said is increase that company, XX% in plan look I've in at I and income. really, which for adjusted first our by a Now We year-over-year before, year pass. 'XX as I when to compound we In will can at started over total our So subscription XX%. the XX%. in But goal it, in And at monitor that? 'XX, the than

intrinsic to might a a that faster. mean And internally we shareholder as XX% years, do to to 'XX mentioned thrilled. of shareholder, As have anytime a But be and goal of closest 'XX, target. think XX% Drew value we growing we’ve is our think income pipeline XX% do. it's I've doing I'll I lot probably our that proximity and I'm my If XX%. a will be flow. in we'll grow I'm XX%, been there. some ecstatic as see we letters, things we'll the It I as which over in things we're got XX% adjusted will lot the the a company, mentioned, setting And probably operating growth 'XX. in goal be we think will hit not how be backflips. happy

So I’m super about future. encouraged the

Margi Tooth

that, in terms add of I well as to the future. just Can Jon,

tough is do, Just seen with point, able coming the territory there. being off moving for trust Darryl's the partnership stages things a support that the very that back growth when strength that impressively, in and back strong able pushing early we all an perspective. is coming we see numbers pet we've year-over-year been some our we've direction both very hospital to from retention a end that what the think count. of in service, from very of overall them which to the being looking ever. we've and am of comp from we and traffic a in they means the we're been seeing both that acquisition the in market to absolutely retention need the QX perspective about the channel channel confident and overall with it the the traffic about specifically able positive and driver veterinarians QX, fine vet vet real side when products unrivaled the of that high-quality acquisition, levels and very back partner This of talking to inflationary But than the so, a the is offer we're offer through having trend to through be being a vet time I an

Jon Block

rate year-over-year, question, a I end something, second But veterinary long. a modest, going Darryl. with is which XX% more well of maybe in is think X%-ish you world. just so below then inflation on the said it's to opinion the And now to And of up little X% ARPU your

you on not on moving pricing said walk I ARPU because a to that part the hey, mix. a But direct of Just and there’s look, that parts million there’s get catch to is try up across it.

So I be been just want I’ve past. to confused clear because the in

saying, or when is examples Darryl, that puppies the are pets. lower below alternative coming were corporate what are coming ARPU. maybe that I pets are those call newer The or you were ARPU channels, ones on, you think on giving it, kittens

me of correct? that Is sort Let there. pause

Darryl Rawlings

Well, to correct, there's X things Jon. I just want

veterinarian hospitals, there's in some all. said I X% So the XX% of to increases not

larger paid, are invoices we on on not that's see So invoices. total to and -- starting that's

There invoice claims last and actually X% to taking look earlier the question veterinarians X%. invoices They up, years, as is dollars then seeing larger going were the a clients would charging all change going to we're has if was deductible your that's X% cost are we're insured the haven't. for well. They've XX inflation X% So price. that's been place today our what total that with first saying, we But of about up up. going deductibles of for been gone Historically, the Trupanion for as down.

XX% true at where been often were XX% largely city in city, if cut after of ratio. say, take we city, So impact. been when we enrolling a the year. for That But the But an really the And a blended are there are XX% pet. we in a half loss same business we was It there we and before would we the was ratio -- a XX% we an been other on year X let's growing for slower them running loss the and city, an that running is under had half. faster the if general, example at we made happening have had has in is XX%. we -- What XX% were city, average. than both has is and half

lower priced seen the were higher the to so one, doing you what price neighborhood slowdown in growth the price and comparison in lower you And in see neighborhood accelerated beforehand. you've a

many Progressive a that was And of risk an insurance than insurance a would insurance more their accurately company. for different company other Now, is business different years. companies many, than pricing be that mix

a get we changing. IRRs. to to be continue disciplined refine our to is pricing, And strong goal is Our grower as our blend

lower average. veterinary Now in in going international of addition where have some the our expansion, to continue That's and blend. other things plan to Chewy in XX-month Aflac with that, on and well to as we'll as costs

in is going XX% in what in easy increase about for managers us growing margin see our ARPU a X% to added XX% in adjusted to as to had it's in year-over-year We will But a because now, business, we subscription 'XX, XX% operating predict blend of good adjusted about had revenue. 'XX you predict growth of that it's really We before, rate in really Right I operating about our margin. pets on at 'XX hard callers an margin be. greater and So if expansion. and we're be mentioned a to blend our were XX% output. got couple you pretty

the are play in operating is you I adjusted there's -- things that monitoring there's more future So And how be then, it dollars adjusted anything growth I operating margin of what year-over-year at that at. and many going income play. that rates And at things of lot return right. then of look and internal the There able I over to are a look outsized the XX%. we to define deploy which are

Jon Block

But I'll the Okay. was more opinion just follow Maybe up offline. Darryl. of one

you're over on, But cohort dictated the but or the rate I books books? ARPU is that if that a the hoping pets just the that Just internal words, a PAC bringing already bringing a internal we entire an when In on is ARPU, has the that XXX,XXX running that doing from not why were Why base XX%. of And wanted quarter? on on sense, $XX rather rates level, it the at entire dollars, the other of the than in high off-line the that out subscription cohort is are more you’re always that run opinion to standpoint. predicated could take by current right? there you're return, make that or it returned throw

Darryl Rawlings

driven Yes. or IRR operating adjusted by ARPU. margin. Well, driven the income actually by is the It's not

are months operating we So and how gives pets calculating when operating our cash our are spending when what it. of spending? take that we’re use of all internal stream by the And much of going you to of assume income rate blended adjusted X, for the much that What X, income, scenes, you a on in not number is adjusted a the less years dog. say, report then is, in the the And multiply adjusted But you flow. way X advance. cat you that it the operating we behind calculate it income are does you we larger we aggregate, we’re than in we have return X, for

we that going you understated, income time. actually it’s adjusted further it. how conservative how So it to we up that’s and that’s on off-line. over can we But operating the have run go assuming And on average, is – questions, if jump

Drew Wolff

numbers. can up, that I important Jon And that it's people our when also replicate we mean, set

up. set was it so And

financials So having into that know back new ARPU. without our you and to could take

So up way. that set another is reason

Jon Block

to transparency. Yes, just bring spending I if want I the $XXX get know cohorts. the pet $XX you’re $XX or on to cohorts

it, But that’s good, it I’ll what all in investors get of, to follow-up. being ultimately matters. run guess, terms I I able think I

Operator

from Wilbur The Elliot of next question coming Raymond is James.

Elliot Wilbur

about impact and been a there's you of that think sort or of rates Curious your bucket where change we’re then higher in buckets think at of given of could excess whether either you This as earlier. increases price what not X specifically at trends of asked which may about on your impact more ARPU been I to missed in not have But bucket get sense might thinking would it. general And experienced just of have historically, I be where the to outsized where each -- those smaller XX% price book of, XX% looking churn? have increases. overall more the had that and buckets obviously you've want just in end, kind inflation? I much guess,

Darryl Rawlings

for and point our not from the letter. goes good I'm haven't it articulated a It's Elliot. churn accurate. it people we read that report year how you about comes where Yes, shareholder that how through. after But exactly sure year

a Those pets ever new our buckets pets. X have And we are new we largely report not That's lowest those retention. that change. So have on. had yet actually rate

spare, their have kicking the are sick churn were That's first were disappointed regular and on and going pre-existing conditions. our or a be churn and was get could currently bucket. what our dog in people on people highest neutral to sign highest they didn't we that was. cover Those that people confused level. wellness we're we So is pet there. tires, coverage It That

a have increase smaller time bucket And is become what are rate could bucket that are bucket retention. are. churn And you'll going bucket changes greater that is are -- to up. XX%. at less conversion now than all-time to they're we will hoping they XX% increase of start The is if been. reported the the highest XX% veterinarians of historically our for record look you, at And under they're our what retention I'm And that but That of we percentage, unless on That's be But numbers rate can second it what right XX% rates, as XX%, where XX.XX% pets to third a were And also I have our XX%. over our our a down, see changes than majority I year. seeing Referral XX% growth. it's not are we you going year-over-year. -- can at up as rates rates tell the slightly seeing long churn us. rates medium where how And then is so people we and are Adapet believe. also their

don't high ever. So they our being need sensitive. the again, is we as And in times greater inflation, the value that product see we once customers are attract of uncertainty of but price-sensitive certainly than for

Elliot Wilbur

PAC past categories number increase at think wanted in and a generation the up you've cost than bit to go or the give trends detail rate And a seeing period? Wondering conversions rough little higher and to I in And X number Maybe possible a split between more just on the conversions us the ask equal essentially relative time. this more, some a I given quarter more into bit in insight those driving going if is the that. generation on maybe you’re over granularity just PAC. conversion rate in allocation little the increase in and lead PAC a dollars the but to between and lead provided question what's of

Margi Tooth

Yes, this is Margi.

we few when relatively over general, the been PAC quarters, So we think if look it it's flat. about last at

at of it 'XX, X.XX%. QX in was QX X.XX%, So was QX X.XX% is

overall, that think little the you really So between quarters. when very about there's movement

XX% mentioned and kind XX% point the is internal time. returns. given at the guiding we any of before, As been us real for of of They've between guide like in

Our the convert between retention. overall split and

as a the that So retention just element reinforcement of goes that the cost, works loaded first is all year, dilutes It within after our a that proposition fully do the, reminder, sort This shifted right acquisition hasn't everybody And have PAC. as of we of right kind now pricing lead of of which combination of an a into with really right purchase. on we focused has or from are is sure there didn't that space. is value just this at couple the message we do, at it how different a are constantly if time do convert. attribution make points. significantly we by looking We're we perspective, the the But points.

pull through to the that journey will elements someone number a a funnel. different So there's, of

for to vet straightforward. cleaner got very It's lead, simple. is So but a regions we're different a mixes. lead the have The going if a to you referred overall then see going Similar you've upfront will cost is referral much example, with have be of stronger the it's lead because for very us bulk It's conversion different upfront. that.

view. point a the you to -- towards of X And want make moving quarter, quarters, return we're saw the a of specifically kind it them in They're to is isn't looking changed. said, which we areas midpoint. we like coming be to great this as in general, from that talked being that But opposed margin adhering So hard on always about we all pressure rates we that compression just internal to last XX% push like, as deal various hasn't general, And PAC see spaces. as mentioned. and it's really would And over certain as want efficient we for a we'll of when on where in sure want we others. really through I

as So particularly. shift continue between convert levels sort of to and haven't and at need seen invest well, teams the similar a we

Elliot Wilbur

you just period in territory ranges that the or the that And of you realm the then of of was that sort severity see anything what specific mention this that driven claims; of call led Did that you terms within historically of in last the have may for uptick sort out? question Drew. to

Drew Wolff

Yes.

As I the I in adjustment mentioned, with ratio in the at the talked coming of out big and loss the COVID movements loss shareholder seeing we're being expense. meeting, change driver about frequency then

of points basis XXX about move. were X our those So

inflation basis was that, was that of in really saw XX points. that were acceleration So we back it’s that half XX the and June pricing we extra basis for points the

that So is up. part picked other the that we

uptick able move I the any board. and talked that basis in we Now luckily, quarter points action were to of XX severity the across region. in but that not take specific in that mitigate about about. It’s it’s And

Operator

gentlemen, have your all Ladies for like for today's in the you We we that's and time would Trupanion today event. questions. to thank participation interest and

and may enjoy of walk You the evening. off disconnect your your the and lines rest webcast

Trupanion (TRUP) 4 Aug 222022 Q2 Earnings call transcript