TRUP - Earnings call 3 2023

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Operator

Hello, and welcome to the Trupanion Third Quarter 2023 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.I would like now to turn the conference over to Laura Bainbridge, Senior Vice President of Corporate Communications. Please go ahead.

Laura Bainbridge

Good afternoon, and welcome to Trupanion's third quarter 2023 financial results conference call. and are Board; Chief Li, Margi and of call Chair Officer Corporate today's Chief SVP the Trupanion's of Tooth, Finance; on Darryl Executive Rawlings, and Controller Financial Participating Officer. Qureshi, Fawwad President; Wei

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

Darryl Rawlings

X metrics Thank execution team's sequential of happy Margi's quarter. within in improvements I'm over key and recent you, leadership our third reflection the a Laura. financial the The direct progress are with the past the months.

XX% existing our of our earn me For number goal profit in new from a margin clients. is people of to be increasing story, the benefit appears to what interested an to our

their our primary margin by operating revenues large as alternatively from income choose our refer we monthly The our the our pets income. on subscription pretax history, the a to and in underpenetrated to and range invoices inflation XX-year in With drivers or our members minus our to dividends to invoices shares after per are of we consistently or business of fixed In adjusted expenses, has this cost new adjusted veterinary our behalf pay market these X% adding veterinary veterinary operate need lesser the and the repurchase growing business. we costs funds, year. we reinvest taxes.We collect in X% to our of incur variable of grown degree, or operating to pay can measure our profit

the historical after equally our veterinary of proposition cost these within year.Coming Within over began to levels quickly care in points record track XX accelerate. basis was XXX value out veterinary an additional a Our or delivering inflation period norms. historical increased of of inflation pricing months, year less target X% of to XX% consistent, COVID, X% XXXX, of than of

While this rapid margin slower Adding has of at slide operations the our should core was rise of would respectively. XXX executed Today's business, our XX.X%, of in this X Trupanion, XX made Compared extra past to had to existing year. react this margin years, until a takes of in The impact. team our and subscription core this XX-plus annual liked. I in XX.X% unprecedented we was against consecutive in to reprice and without this XXXX, X X.X% to it than points were care our the to margin restoring months, quarters compressed basis to cost change material members.In a have more compression the hit QX of our includes basis challenge, inflation target veterinary XX same current go rapid months means presentation mandate well our inflation, details.Over this challenging. After our terms our adjusted point these operating was veterinary sequentially it saying, and margins. XXX policy business a low us to XXXX, for XXXX we

operating flow. team operating a tough business free were into adjusted our more making granular improvement improve And through a a structure the much and operating quarter and on our translated believe and We the is margin what decentralized basis, necessary deliberate are sequential to efficiency. empowering more taken decisions cash actions managing but The our in in I meaningful. significant overall

or this revenue. free quarter of our flow We It going our Total that quarter. positive basis up this long-term target Free up $X to at about since highlights on is year-over-year, have and back progress.With an million am decades encouraged operating XXXX. XX% work in was targets, I XX% $X cash but market an XXth was income results. of for underpenetrated positive flow the accomplishments. our financial our dilution was getting of cash growth the approximately hit that, I'll expectation, quarter's a by turn over marking around approximately years is revenue actions Adjusted we cash annual of backdrop, free still come.And $XX margin current over to to in as this XX%-plus X.X% flow improvement QX total for I'm or to do key This to with growth million QX. our million, consecutive public million to will sequentially continue to equates revenue in from the $XX in we our over large provide baseline while Margi? in taken details additional the avoid it and more Margi to debt going QX.

Margaret Tooth

were at pet, hello, primary on revenue year-over-year reflect subscription European Total currently work output am are strong pets X.X% was Thank pleased increasing increasingly rate than a everyone. performance. XX% year-over-year. Since behind of our year-over-year taking noted, reiterate, pricing cost Trupanion kicked business.For include the of average the unprecedented flow driver a per their does blended at an Average see growth the European revenue blended pressures are per otherwise was reported starting basis team that up increase our To experience. subscription up our were in with of pets was business, which average, including and our unless XX the member you, keep the accelerated Darryl, purchase rising hard year-over-year. XX% efforts of Please and example, pet has higher the X.X%. care. and ARPU actions in a business, we to in rate, over metrics that for ago will now of book the I to not inflationary mix and very ahead mind been the months

an had flowing price XX% the book. estimated adjustment quarter, the through During we

power our this the American all backdrop our believe target months, in XX anticipate months, with Isolating blended remains pricing impact year. as of retention XX which, a high.Across favorable more reminder, new model, than our progress to retention as of stayed a the was actions average our double effects member of customer the on a the members we average against pricing within to is us case Trupanion subscription result pet Trupanion Our remainder of pricing North average. reflecting our is products of seeing and business, business, of this of combination through be industry outweighing good with existing continue of increases impact business. and highly the products the of subscription branded and will book quarter.We're the the a mix that this We life

the towards As More in a book offset consistent, in invest pricing members year.I'll the income the margin, $X higher with was in margin ARPU With increase increases us funds value underpenetrated help point an XX% pets X lifetime X. cost comparison, value target of an by our expanded benefits profit than over large and our as X% from in of basis service to When more expenses This remain quarter. basis the means prioritize market, XXX operating estimated member laser-focused or quarter driven our flowing in support next was pet quarter. to growth. efficiency by funds improvement margin retention operating remain a quarter through to proposition, and in more actions levels.Additionally, parents. XX% by anticipated This year we're approximate assuming towards to Trupanion efforts improvement adjusted combined growing a improve operating realize point care result in retention. of a the subscription around continuing our partially notwithstanding, actions and XX% to we in in earlier in also dip we're points available our and end the on to of we that and able reiterate we positive adjusted began the throughout taken X

We invest on our at continue to rates XX%, measured opportunities an high of granular funds internal XX% these of to to level. return extremely identify

of continues approximately Here XX,XXX up QX. over this deliberate and context. was made adjusted pets $XX.X the with of quarter, is veterinary quarter to speak over can in million acquired $XX reflects XX% in and the income of pet continued the the the this reduction million, our deploy to this indicators decision more our conversion of We strong. which operating power believe year the newer In target leases leads. remains pets benefits up to the Compared veterinarians insurance. our majority efficient. in were This this metric XX% the high-quality within number virtually channel of rising We also medical of our leading the pricing backdrop channel to veterinary comprise cost added acquisition with care, of channels. leading represents highly investment. a the less distribution spend.Against Despite spend, urgency every with performance the prior prove to conversion to market.Turning Encouragingly, the same period, are

also products new In of strong contribution and our pets our nearly saw came quarter, from both XX% new from geographies. new We initiatives. continued the these

a we as business. products, Trupanion As contribution the to provides better out new with increasing all metrics new quarter, the America, aligns from of transparency do related and believe North the overall North of breaking will be metrics last our in branded geographies.Not growth our not international growth given decentralized discussed product this primarily our new performance our we core forward, key branded areas our only of growth level approach execution, by but to America, it Trupanion and our in initiatives, to moving

one measurement fair continues no As longer expand, dollars returns provides and our metrics on of a business invested. into blending to impact our

ease our today's of included more new the our segment. we be how perform expectations For slide IRR updating Note of our methodology life us across these reference, of with details presentation. pets are will P&L, to in by we've their over reflective

expect new pets quarter adjusted branded appropriate the time.Within period stay $XX.XX. over XX%, We spent line at of This pets assume to quarter. an of in period but pet internal Trupanion of to these our consistent into was will the XX,XXX goal new XX%. average, in $XXX, core Combined, continue XX% The an long-term will of results Trupanion with new believe of add million life value $XXX margin below of to a most with these XX%.Turning pets of in XX of increasing mix with an before. average business, Trupanion primarily which just given of also to outside of this to months, varied ARPU enrolled estimated average over And cost in acquire average today, for growth our a methodology with for their products, our the our report rate the return $XX lifetime translates new we than branded size we X-year and materially prime overall North metrics American the under our which not deliver guardrails is they our Trupanion, assumption. We different. more X-year collection IRR an significantly to our are a impact of XX% operating of be also our products, for average approximately products

you into more adjusted of average breaking a dive target business resulting Keep XX% deeper new the these $XXX. these cost or return to this For in $XX business is could a done thus And example, below ARPU operate spent our fully internal of of target get these we X,XXX acquire total spend these and underwritten rate of Overall, negative goal spent be quarter, resulting for and these we paying $XXX, pets internal can with margin this and pet internal adjusted of Until spend our in our petner years, Trupanion's stay are If different on our rate adjusted reached driving relatively as a enrolling approximately Trupanion. products ahead, rate to we to of a lifetime in can strong. about will an was businesses, the typically guardrails in to will months granular here. level, confident structure. to per of can adjusted XX% only there. a that our margin to were in line XX% continue disciplined rate light to geographies.Looking today, new view European XX%, internal these assume X% existing see, in period X,XXX added area.In types and quarter. XX will mind, to a however, and prudently, stay intention we capital X-year an example, with to This however, in a our have depending however, capital in we we margin ARPU It Today, pets of business Today, in average months. mix XX quarter allocating with lifetime low early products and to expansion products target. new maintain is returns product we this roughly now operate approach the deploy target. us Similar in of the at pet with very Europe operating our both today basis, return. XX% Europe, within operating and in that not XX% of reason, have goal would operating the term, for and on spend the pets experience, Long book on Long operating spend not $X deliver it's including acquisition is this expense operating at estimated Trupanion $XXX,XXX is a can to to at month. of scale, by vary of core these million we our the which, underwrite per remain our of of value was pet these growth, our then, our it our to we the pets term, levels we actively be yet approximately these efficiencies us By results margin.On in book.For pets dramatically $XX.XX. as add earn expect the we new for the per consistent we average, average we margin value $XX product return selling our product. pets return our prioritizing and down to as PAC XX%

their the baseline the us flexing grapple a on our and care. is intend positive hit objectives. flow foundation With solid a of and deliberate and inflationary levels of of areas, with our levers pressures business a operating high Over the our This team of Veterinarians cash in health and sets record established, each which track achievement of the stability way, increasing to staff to taken modest positive of it quarter. of delivery testament to financial to propel dedication remains in success. focus meaningful to our cash structural profession to veterinary for several challenges flow affecting that these and stay we've free quarters, moving our free critical we the continue forward.The building action helped past our

to over forward yourself you the to done addition to We appreciate across to have to you a tremendous Fawwad. officially have the working look to hand be a to Wei. and on I'll Wei, remains you at and It's the our going the be in thank call to designed third the to up over cost-plus these a over quarter so, our to past to of to welcome him you've I the what solution greater stepping Trupanion.With all that, financial Wei a your been team call to you. also reminder, detail. you've heart business. As great I'm leader has we closely year. discuss continued for and model want But forward a with veterinarians do deliberately contributions a do.In want Already, hand and Supporting been to before teams fantastic look I I pressures. partner I results alongside is proven our It team. moment, to the pleasure

Wei Li

ahead quarter year business, are Total XX% for and details fourth up provide well afternoon, currently Margi, up X.X% will subscription quarter full year-over-year year underwritten period. to I $XX.XX, everyone. the million, over our our the This was XX,XXX XXX,XXX $XXX.X as quarter, which XX% pets per by was expectations. increased Europe, the was XXXX.Total million revenue pets of includes as up pet share approximately the and the performance revenue Monthly XX, of our over year-over-year XX% $XXX.X quarter XXXX. of around as good third third-party year-over-year. revenue for for additional Today, and September quarter subscription our Thanks, in pets underwriters. Within average in prior outlook

of is mix, will our As a for Breaking business. growth our core pet products inclusive the products of reminder, this growth business.Highlighting quarter. was by mix the driven new $XX.XX down ARPU average North these and for of this subscription of reflect all XX% this branded revenue quarter. XX% American Trupanion year-over-year was subscription in

pet added Specifically, Pricing growth XX%. reduced increases X%. mix contributed while by XX%,

exchange revenue reduced Lastly, X%. foreign growth by

the Additionally, America quarter, revenue our resulting invoices products basis XXX improvement point quarter. a remainder million $XXX.X target last sequential the our from in the growth, XX.X%, a of proposition of over X% value contributed cost North paying in new in to Europe.Subscription coming veterinary with business towards was

fixed As X.X% subscription income. and from we the calculate year in fixed expenses, operating X.X% variable and X.X% as out paying quarter, cost were quarter the prior from year pre-revenue efficiencies. X% the expenses the and revenue, in reflecting in down X.X% of of down the our period, adjusted of of into veterinary prior expenses slightly initiatives the shift reflecting QX.After prior expenses, variable invoices, in but cost development percentage a of were periods in up quarter, a percentage from revenue Fixed expenses

turn in of different a business and is a and This variable in segment, Our a subscription expansion. of other profile points have delivered our operating component basis reflects or XX invoice that or approximately in margin revenue. X.X% from of comprised basis which sequential XXX $XX.X services scale points reduction expense basis quarter fixed I'll our veterinary income This generally revenue products prior adjusted point expenses.Now, the and XX.X% subscription other million XXX than BXB to of margin subscription up business from is of business. and

included XX% Adjusted expect million one-time a was year-over-year. the business $X.X annual to revenue of quarter, quarter. that we the other was years. income segment recognize future in the increase Our million this This don't for $X of true-up $XXX.X approximately operating million for in an

ahead said from and have expectations. growth and $XX.X total, this with now operating adjusted higher agreement revised rates, we up up margins sustainable moving segment period. As this last XX% us million of of before, QX This year's income makes higher forward.In prior was provides partners the one was year X% partnership from in in our which QX,

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

a year per quarter. QX. the period pets, European prior in X,XXX and cost $XXX to acquisition compares in the into translated approximate the This $XXX Excluding pet $XXX of in this pet

also $X.X We in development the invested million quarter in costs.

was percentage some prior reflects into development new of of expense shift of over expense acquisition X.X and compensation and grants in stock-based X% million the that and fixed a pet performance period. XXXX, our vest compensation step during stock-based subscription to performance-based revenue, XXXX As point compared was and period. variable, the $X.X expenses expense in percentage to our the is development $X.X down This business.Stock-based XXXX. in quarter. new most initiatives million within in approximately for related out the mind of of Keep year quarter Approximately our recognized the a compensation of X-year

performance in XXXX. did As not grant we have a reminder, a

$X or million of prior the per quarter loss prior and or $X.X operating diluted flow million in period.In basic diluted to of net $X.XX Capital As period. flow, per a basic $X.XX in quarter. was cash and year expenditures $XX.X a compared cash the million totaled in the a in the negative of million terms loss compared year $X.X was loss share result, million to share $XX.X

quarter. result, million a free from the over cash As million was positive a $XX and improvement $X flow second

capital short-term ended available quarter cash estimated at in with We $XX.X million our our end and capital of the held credit million million.I of requirement now investments insurance will At investments. facility. $XX.X $XX [ our we than of subsidiaries, sheet. Outside in risk-based outlook. was entities, additional with of our balance quarter, cash $XXX.X we surplus short-term turn insurance the more million the an the $XXX.X to ] and million under maintained to which Turning $XXX million

For guidance XXXX, revenue range $XXX which raising be XX% We're increasing at year-over-year in we're adjusted this $XX the range $X.XXX our growth at the XX% in our growth million guidance would million, $X.X We the to represent to of from the year range adjusted midpoint. million of $X.XXX We're $XXX income. operating of $XX to to expect billion our operating midpoint billion, the the the a total representing the to of for be full of increase the total revenue income subscription also range million increasing million. also midpoint. range, outlook. now be total to of and in narrowing At midpoint prior the is

to $XXX to be of revenue, business.For of of is income is percentage expected in adjusted revenue Total in range meaningfully the million. fourth to the million be more XXXX, in margin million the fourth quarter total is operating to $XXX expected operating actions in expansion $XXX pricing to range a of our $XX be of to through flow the quarter range Subscription As our the to million. as of $XX this book million adjusted expected continues in $XXX imply million. revenue

subject conversion and rate our between to fluctuations reminder, Canadian a revenue currencies. predominantly As the projections are U.S.

to our used projections, conversion September.I'm call the of Fawwad. hand to full-year For XXXX was fourth rate XX% over rate end at and we the a the in which now approximate guidance, quarter going

I it look you. get Interim conversations for the you. to honor to as say to was in our continuing Trupanion to CFO serve know Before so, and future. I I an to many do forward Thank the want of

Fawwad Qureshi

opportunity getting know the only months. Thank afternoon, that our joined, you, myself. and This in been in consistent to I built to expected be I'm and few Having forward was consumer our love a since that It's brief about and rate us growth introduce confidently everything my look to lives of this quarter members sets our worked I use thrilled to many you member I major Wei. Good change I'll is say to everyone. I remarkable can brands, weeks that coming true. quarter team is to company this and goals. find evident our company apart. and with XX% monthly after retention in passion optimizing I'm world-class vast cash by to business profitability, growth insurance demand impressed to and our importantly, products. to their their ahead. been prioritizing mission. contribute We're dedication witnessing There getting flow.What the impacting to need role excited veterinarians Most greater and for attracted never pet pets the of in untapped Darryl. that, a company's the Trupanion's years also enjoyed the and the owners me prices market know I've I'm and and for has levers, team's to to and lives and I'll the over unwavering the this mission.With was our and navigate balancing team positively product ability to growing hand the call

Darryl Rawlings

To running. you your continued have for on-board ground you you see Fawwad. the leadership. partnership great to Wei, hit to thank It's and Thanks, and

be so, for to to Investor it held Meeting be Annual Shareholder want Day doing Before historically September. June in and up drive XXXX's greater to is we'll Investor Day in-person Seattle. investors. more our room some spring typically highlight following busy September we hope we I in will schedule once our our amongst participation held in that again open very create a questions, breathing what moving In XX,

Our event up in this September.With the it questions. conversations have you hope to in-person that, and With for. quality you we'll of see those can of open is us previously allows who of attendance we for optimized mind, in to for many attest joined this

Operator

Maria [Operator question first question-and-answer Instructions] the from session. begin Canaccord. comes now will The Ripps of We

Maria Ripps

Fawwad, on company. the congrats joining

your in full to OI guidance. there your of closing year highlight adjusted anything your maybe was just raised that And First, margin GAAP? of to see a of stronger Is we progress year? than sort OI progress does achieving obviously quick goal XX% happening of impact could by expected And and quarter you end how guess quarter the your sooner? incremental this in terms that clarification. guess, this I adjusted next your I

mentioned drop you I adjusted impact payment. that? OI? Maybe clarify one-time Did that think a could you

Wei Li

ahead of then came as Wei. -- say also of our actions our expansion our into the Maria, business. having driver operating main we're the as and are Yes, income this pet this acquisition more meaningfully like more expense. pricing we are cost we margin expectations. of is through I terms And would in quarter, to, flowing book adjusted disciplined

quarter. higher well a margin been growth -- chime us got worked wanted partner, has And And million I we expect expected, this -- to had turn as quarters more increase.In say I is this operating Margi this had that, in we this true-up we about the segment, incremental not this because do one-time get other in I their ago, to growth. expand adjusted this a so. AOI few to over business next And the to amended through the expected. because And upon with maybe is margin mentioned So, expect we XXXX. this margin and to I to next is repeat this earlier, terms reminder, that, think forward.And $X continue one-time here. past the for We as agreement yes, months. of of X, continue XX year income pet we higher higher we along expect October XX for going to from a annual necessarily our than business months the with dollar to

Margaret Tooth

results, in income. the Trupanion's quarter Yes. highest team. this Maria, overall, is trends the operating for of And this adjusted from overall, our of how in Thanks, Wei. history performance in ever terms terms AOI execution the second good it's

the sooner. X QX. with pleased the for quarters on have of been we're the that by assuming same going expect XX% We're the assumption At We to track for XX% we this the do through cost it it. flowing remain not to point, with last a we're end care book. operating of still come So,

to anything that in needs In of yet to to seen the of haven't the this with approach change. continuing we deployment and looking we level forward We very maintain And will to terms interim though, to progress. suggest year focused disciplined are that remain capital execute same to we're next heading our that to discipline. priced into level and

Maria Ripps

of rate you sort on to status remaining lead in of to you you the you increase? this of And secondly, thoughts sort comment provide whether planning refiling partial for update what able an newer of your were rate? for you received the approval refiled then the earlier have your of could able on kind are data approval And share following year? maybe provide California to some the to are the remaining And should how or on

Margaret Tooth

Yes.

got So, approval we're we in with We to states. in after a continuing our our mentioned refile we've California. number of QX, continued dialogue

of and be that to target working and year-to-date, board over filings expect across getting focused the the with to very before been value will rate with rate continue had and to had disciplined end the far proposition California will all right we've So conversations regulators XX year. we the our the board. a on productive well have approved, file across We another

board right not filed yet deploying that then areas across granular not to be ensure can our have We to the in the returns now, approach make maximize very growing question to directly. them. continue in between we're on we just the your the capital And sure we're in and California answer we'll and

Maria Ripps

quarter. the Congrats on strong

Operator

Khajuria ISI. from comes next question Shweta Evercore from Our

Shweta Khajuria

for comments is power one has. on Margi, that first you pricing if could your more Trupanion detail The provide please on

but gives board. have, the And of pricing for confidence books, sustainability your pricing lack where just the then what the today going low your the given on the increase but thoughts of you, with by the second not question in surprisingly a stock is -- only Directors, not through So, buybacks the across maybe power? you I by Darryl,

Margaret Tooth

So, I'll pricing touch on power. that

statement. number a indications of the across the different estimated leading to So, business

of biggest greater a see on that before. indicator ever for our is, product First all, need than we really

to color to his into context introduce from Fawwad is Our a to very coming for retention think of I rate point. our helpful this audience really provide with reservations perspective, it the us, line will the this much be most and at your conversion love the to and our expectations critically business. for bit I point, is needs strong I'd in think our up, veterinary actually are do at call and understand

Fawwad Qureshi

increase, X% increases. a your significant Trupanion Thanks, me these the judge From When XXX,XXX those XX% within customers the we has short XXX% operating received of world there in a XX% increase come you'd are and value power brand, that I ] chose of what pricing we numbers than the over be consumers of we I've retained is been year, I at course, would saw thing in revenue ultimate increase been [ greater this a to you of one tells only Margi. me customers. nearly this look the to Very from, From this that nice adjusted stick time. meeting They In with Consumers, case, Trupanion. what it. with pricing the that because think value But and consumers notable were expect us value cohort increases, here when react. is engage income. offers. they they Shweta. that pricing for

trade-off was AOI. the this accretive to to top impactful So, financially and certainly more line

Margaret Tooth

Darryl?

Darryl Rawlings

for XXbX-X buybacks. you plan. buy I'm Shweta to low personally And to your had when plan, that approximately question, surprisingly cancel not shares I a able X months.

what lays we'll the So, ahead. opportunity see

Operator

comes from question Bank next Josh Shanker America. The of from

Joshua Shanker

cost per down acquisition year pet a average $XXX ago. quarter, was This $XXX pet, from

You of at to back pets past? in based or have been get And pet bring substantially contemplating if the have about have higher pets lower you period What gross right you the the want per this pets. XX% spend pets goal, difficulty pet will spend Commission achieving you learned your to quarter-end, to how XX%, be the have from those than it's added the the in much Trupanion? MLR pet that European much before to in to trying weren't stable. you don't you we you get would in to do think margins now a per of spend through count XX,XXX get as after Maybe that we order

Margaret Tooth

essentially just challenging we message the our is bit you and in pet so quite the to Josh, thing quarter. want reduction exceptionally that earlier effortless XX% year-over-year [ an in do ], off stress kick consistent heard the that just a I keeping if terms in of the to count PAC, the XX,XXX team made it

proud of back. the I'm that So, lever pull to very ability

For to spend us, into give cohort. of you visibility we per be internal what help cohorts rates return different understanding will out that trying reason really the broke to is the we by

we'll So, And value we internal margin able continue as XX% mean we're XX% our as increases, may the as to spend, of that, time will by segment PAC a expand to by you lifetime will our on value pet.At that cohort. to and lower our to our over pick will we're spend. more acquire to that. It that think lifetime to be not our focus margin going continues money margin deviate PAC from rates when return being increases, moment, necessitates spend that up that less different our or

teams it's use them levers over count margin that PAC start pets on that we've again. than large we it So, rates and do that a comes. pet to appropriately. higher their again push Trupanion sequential into because to of into to more Once be disciplined.I opportunity and internal a within has lean to that But we more leeway acquire that parts back got see core a will that we that's quarter-over-quarter, been solidly the margin every will start back is at very months actually little areas And very seeing expansion and margin that and to key think we that XX% come will for the a as about here, now, you see excited we're grow, the expectation with the different XX% value. we and few dialed monitoring our this the are expansion bit think I'm different the see last quarter execution American are now at to gives push have living continue of the improvement we've as expansion we return that to guardrail of to quite that deliberate higher that can business, our that, ensuring levels subscription we priced North lifetime thing that market business accordingly.

Joshua Shanker

added Do be the lifetime going higher that position? Or a to because you is that a MLR being pets elevated think today from they of around start XX%? have

Margaret Tooth

Pets enrolling today?

Joshua Shanker

Yes.

Margaret Tooth

that priced appropriately. Or enrolling pets the pets part we're -- absolutely for today, are the enrolling most

how with we're very being specific are enrolling pets. we So,

see rates get approved, our So, with that loss focus as be is we on where the ratio consistent which at XX%. growing, as value proposition, you we're target will

Joshua Shanker

and a a last who that guess inflation in higher you And slightly have inflationary MLR? that my bought who we pets bought, enrolled the came If then person I was the changed product years, few in because the XXXX, numbers. in understand average Do the than look, of is the going cohorts are average -- think I spike? XX% to pet those customer

Margaret Tooth

when XXXX. been or historically, depends either adjusting people's we rates, we're been months, up that down. It adjusting If XX think enrolled it's you in has up. adjusting about Lately, every

to dramatic to And of our You by will that's the target there broken large get between be breed. book whether or out is difference we've the a at the -- across our is one is different reasons XX%. and -- segments demonstrate location, age pets, individual

as our opposed people where So, is be to a proposition with being can. to value goal pricing we taking rate

target depending to XX%. overall, different getting But and rate closer in our are renewal just slightly our year. on the the is So, cohorts closer

value if at it So, where XX%. come see that was proposition you from down

overall.Does XXX your closer answer That's XX% You've it points. to that heard moving it come down that basis question?

Darryl Rawlings

don't charge it. with else. promise, new we that Josh, rate we're existing for is renewing people exact pricing them What or our some months for of charging understand members, XX some our behind members maybe the same something but

So, proposition. is rate. get is same $XX the exact they rates that's renewing we Goldendoodle, are that same value But person new when offer the person for what And getting. if today, the that

Operator

Jon comes Our from next from Block Stifel. question

Jonathan Block

million the like could talk specific if only $XX draw Maybe $XX facility question. million. was quarter, Maybe to just a to million to the $XX left. first looks the just you the credit draw It decision

say in capital quarter flow cash cash and was million. the free excess roughly requirements I I decently of positive in were Wei you If heard thought $XX

bigger those million just $XX the you've again, one So, quarter you today. could think dynamics. talk through specific of I the that amounts maybe to was drawn facility on the if And

Wei Li

with loan we initial Jon, term delayed the XX available. $XX and March, million million $XX about and a facility, we credit ago, at inception, revolver we call our do XXXX, $XX so term as term reminder, it a into months loan in draw entered loan million back

that of expiration $XX an loan date has draw months. So delayed term million XX

either of year, by this it you it. to term, So, or lose use you the either September the end according

So that's with the in that question. of which quarter, the reason your plan.I up like drawing hope the end answers our is line we ended at

Jonathan Block

the can your there million of X.X% if guess second that free answer $XX And $XX my access going why of saying maybe comfortable fair? you revenue that wanted question. the still is I it. I cash Is you draw then you're ask forward, to flow feel million but positive Darryl, even with in net excess, safety

Darryl Rawlings

and not, need make Yes. million it us when free cash It to up that we're $XX extra this it date seem positive, a had our a we $X if makes want flow, makes But operating flow cash -- and million lot prudent flexibility. certainly at time. or cash a coming I buffer us more decision we gives we mean, a lot it us easier.

Jonathan Block

one longer. little be second to the a So, is bit going

the make to Just to correct. just to out, the I Margi, I I want some pointed were numbers maybe move they gross you of think sure but flat adds, year-over-year,

year were it, all adds This number, Trupanion? essentially XX,XXX but core XX,XXX-ish a core I year a gross Trupanion. believe ago, similar like, So, call

sources down part bringing on whatever the talk the XX%. that help cash in likely quarter. that was can true, reserves have to was fact that Furkin, PHI but part suppress is then $X So, cash $XXX. that Maybe one-time of would the Payables Your $X of million question quarter. positive, in of source flow the B, then can of to of core you the but million talk was it?And end million cash? a you to free $XX you're of been no And date. B Other which impressive confirm relation, is other be, the and pets, of that sort PAC glove, the or just higher if white XX%,

flow of So, how think positive? sustainable about are free cash some when those we going

Margaret Tooth

right. you're So,

So, as growth And deliberate for part growth ensuring the largely happening do is quite their the member we can on we we're these and to distribution have The us products board the opportunities Trupanion distribution entirely, proposition. strategy it push steeply core sense when bring not value we're subscription business. channels And developed our been XX,XXX rate, us is for doesn't at in bringing to rate the but where areas quickly. very with growth know a our reason The in about we've our approximately largely, is a and change have core know right different them. we last want new year product, that we to was not him levers Trupanion of thing of we make ago, that and on then and terms appropriately. provide as to priced and but do

we're financial be for specific been to and flow that free down very margin us be stability earlier prioritizing us, to we had has over cash cash gross a us really that to end where this so, which quarter, to taking and of really into really we at So by investing.But strategic than positive. us be QX doing adds. position, to how cushion this that we've of position that is year, specifically, a we goal anticipated been should that be to acknowledging operating then with able get control and that's that in margins quarter that with achieved to and give important push also We've on PAC looking that the where

to When PAC. at your very middle we're they we at not individual PET that not of that about market.In and And on future pricing. much to units. and the Furkin point, related and also about comes And bucket, of Furkin us any differently to the is, over sure suppressing PAC, have were spending do as to are to subscription future is think how core mentioned business those as continue hopefully, all, that products we and in perform happy you the there's Aflac. spaces, saw grow it's possible that middle months they we're on it can much differently next you helps make comes into that, working performs growth all different PHI, And get looking scale talked Chewy that It we into mentioned to groups the Really scale too. and expenses. the to money a that to all showing you that into So, and tier we our that terms strategy bring push Within that it as screen. fixed see PHI, slide several business. of to scale. just related That can we to and from part the extra ensure that how we Absolutely. contribution to middle bucket

over the improvement the the way So, I of think those Wei? reduction to seeing that talk is them to the execution XX% feel to.And we pulling means and large and very that happy cash. about that want about levers just Wei sequential in deliberate hand sources team I'll PAC

Wei Li

Yes.

as So, our with And positive on to capital our deployment. a that's $X this year next improvement value proposition QX. to free before, target we're we'll million quarter, flow $XX our we cash million back disciplined mentioned over and margin continues expand, stay getting

confident to annual actually continue going basis. free we're So, on an about forward very flow our about to the be cash positive cash position,

Operator

Wilma James. from Raymond comes question Burdis next The from

Wilma Jackson Burdis

was me improvement? spend, you this of broad just -- what walk think pet is -- but It a through it less Can [indiscernible] that me acquisition the maybe but me help some I through help just dramatically. cash improved flow. question, help pretty pretty know

Darryl Rawlings

are had that. in spending line. expansion, less then Variable Well, deliberate take dollars growth. about on largely generally We've And were sequential our XX% components. to margin I'll There's we and total pricing. fixed main X expenses due

and had XX% up earlier, than that, the year, that saw the have operating a we revenue coming another rate was think XX% flow And be control pets feel One about in thing mentioned we'll our in we had same about opportunity. opportunities. XXX,XXX I after to want -- we year, we and forward greater that that free XXX%.Over achieve adjusted is about of increase. cash so the we is about destiny income can flow good XXX,XXX pets a and cash increase X.X%, we moving we -- we growth So, that really next underappreciated this was free quarter that have modestly

grow do revenue So, is trying what to to year-over-year. we're

And sometimes you grow to pets, with those be sometimes we're do having the of just benefit well. gaining ARPU increases you it and just as with ARPU, going

free about the So, for ARPU great still opportunity future. positive expansion, and flow margin pet cash growth, good growth,

Wilma Jackson Burdis

into flow? Is that a the XQ run good then rate cash on

Margaret Tooth

that. Sorry, catch was what We Wilma. didn't that quite

Wilma Jackson Burdis

Sorry.

into this rate cash on is good side? XQ So a run the flow

Wei Li

me the QX cash understand make let question. sure the Is run flow? we So, rate for good

Wilma Jackson Burdis

Yes.

Wei Li

to QX expecting continue we're cash be Yes, positive. flows

Wilma Jackson Burdis

changed? And I today, the mean, maybe some the color how then could it, you can the average and talk I a little bit on but us estimate in-force about give for just price of both new and policy for that. business that's

Margaret Tooth

Yes.

So think about Trupanion the break business, if we about we've specifically $XX I that talked average core out, revenue.

year, ARPU, on X.X% that's X.X% You starting how for XX% than that to We're sequentially. and pricing been sequentially To that been manifest XXX,XXX cohorts can it's larger about in that Nice our is point, through we've Darryl's improvement increase. see see had got trying that up something which that push and we've have now hold. the that taking numbers. to now itself the really

value business, not uphold priced of is that of existing to rate. terms all is members at Existing come We're making to a our now on In consistently. different line, new business, we're being that right our will Darryl's earlier the proposition so point book rate. -- business in to you're going of to able sure see

Operator

from Our of next Katie question Sakys comes Research. Autonomous

Katie Sakys

I'm flow place discussion quarters? turning over to story? again, you the that flow. First, you guys couple complicate you curious as sales have of do what's confidence the cash cash it be continue I about of continue doesn't positive the giving growth base on free guess, that And free to the immediate in ensure to will next what think

Darryl Rawlings

think prime the team understand a our It's the margins our execution We So, expanding. I control. demonstrated that example. is completely within are

pool our then and reinvest can positive cash total cash of the points adjusted you're And flow. we a percentage off available take is free So, the and reinvest. rest operating if that of that couple we income

ARPU destiny, before, going our to in in the And coming it. feel the get our are to we as help in revenue about we good also year. of growth mentioned I completely control, benefit and So, expansion

Katie Sakys

bit. there development a gears little this ratio? reserve shifting then in And Was quarter's invoice any

Wei Li

our Wei. company have is we a company, intercompany insurance with our reminder, Yes, this in agreement Katie, operating in have which -- -- we this as makes

Darryl Rawlings

the have we reserve. was any question Did the reserve quarter? during change think I

Wei Li

quarter. No, or insurance didn't the actually, we change reserve change IVR have any during

Operator

The Piper next comes John question from of Barnidge Sandler.

John Barnidge

how business on I of about in think do persistency about how I was a level the think where blended the and state But the TruTopia? a curious, channel as I know persistency that basis, partnerships of them dimensioning settles core core would you of state? it forward, by portfolio we in can as going change. think we new the you're and think reaches kind

Margaret Tooth

Margi. John, it's

We happy are the we really QX. very saw with in performance

received terms number higher got just XXX,XXX, pets, members we to of see have of a of persistency, In the such staying we've power. reiterate And increase. our lot that that

which we're member experience those all and of XX% across to vet And as spend, had PAC the leads. our earlier, at the be Fawwad value sure about main that mentioned increase, can I proposition testament to we to the staying of with is power it driver TruTopia look we're of make we channel can TruTopia, as [ people XX%-plus make those the business, the and we cohorts it reduced always of seeing terms a product. obsessive think -- be.In do the are as continues at of seeing ] as we the us good a looking

TruTopia. us in driver biggest of to terms and helps throughout members that has us that of existing second That been period The consistent which our helps efficiency, really is adding this leads pet. then

in So how mind of our working the book future that's this continue through we we're in in business I'm the happy sights your that state.Does keep And answer seeing point question? our good And with at progress. consider that to time. growth we'll overall as

John Barnidge

the is think the then believe, you different profile a year? totally the enter, cost the European want trend probably I underwriting mid the to risk does. and differing take point, about U.S. the I understand the versus underwriting I versus Japan But to Trupanion, some how that on at It because P&L. do next you And market relationship you're U.S., input in planning that's know Europe operation

Margaret Tooth

veterinary it's landscape, When across I everyone interesting. Yes. seeing very trends. similar the mean look globally is you

time. on we're trends is choice So increase that obviously, we're little those have Canada, about seeing economy operating in to pressures veterinary the the there's U.S. cost to under we're that to all we're They're industry because parts depending talking relativity But the Australia, that they lead vets can operating the and of pressure in, at the whether prices and but short that any businesses. charging staffed. sustain they're their Europe ensure

mentioned.So, no as a take a But take way underwriting hold this vary where the product tremendous see to point, will Trupanion. their to and of making see their That's but front a opportunity. in we that our you need to we At to with same, the value right. America. not average believe to the what dollar. there as pet, from we them And approach for they brings that online. are. that that talk of Europe that coming happy about huge teeth the does our starting happy We're people help some as into that changing care opportunity absolutely that in us those will to $X.XX is have matter is give get care you're countries our degrees, and And have to remains take We're we European work-in-progress, we of pets. focus, long across point we really at North for a member sure Now that different I can proposition that being value significantly the $XX, that ARPU Trupanion

Operator

Q&A attending today's the presentation. of for Thank the you is now end conference The This concluded. session. has

disconnect. now may You

Trupanion (TRUP) 2 Nov 232023 Q3 Earnings call transcript