TRUP - Earnings call 4 2023

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Operator

Good day, everyone, and welcome to the Trupanion Fourth Quarter 2023 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded.

At this time, I'd like to turn the floor over to Laura Bainbridge, SVP of Corporate Communications. Ma'am, please go ahead.

Laura Bainbridge

to Conference Quarter Call. welcome XXXX Full and Results Financial afternoon, Trupanion's and Fourth Year Good Chief Participating Chief Tooth, Khureshi, Executive today's Officer; Officer. on call Margi President; are and Darryl Rawlings, Financial Fawwad

we've For is tab. website slides under Investor which today's will included ease be on of a presentation available today's broadcast of to copy A earnings Relations made our slide webcast. also quarterly discussion, accompany the our reference, on

year our As is reported release, earnings statements in XXXX in fiscal the audit progress. financial for of today's

have identified weaknesses material X audit. in that We connection with

result, As numbers a the preliminary. reported today are

to to as the to registered public may file which with and finalize continue complete We to Form company's independent its our work statements our allow we complete the timely and firm ability thereto. our auditors accounting our audit, related -- procedures XX-K. financial affect disclosures

recent everyone those within could are Relations to of the statements other website today's results differ that found discussed. also on the Investor Trupanion Exchange our the of XXXX. opportunities remind Commission. of earnings well XX-K call, would be these reports on Securities in to Forms filed Litigation involve high operations, uncertainties known with and release. of as A safe the the our risks materially actual discussion included These from Private forward-looking detailed degree future that and I certain unknown uncertainties Securities most company's and cause and and and will X-K a Act which regarding provisions Reform as can harbor we the risks of during of meaning performance make financial statements like conference and

which limitation, the including, acquisition or income operating and the margin of return, before use financial expenses, we adjusted non-GAAP stock-based non-GAAP expense. pet results, to to These management found operating flow. measures intended are new references income, expenses GAAP which prepared financial review uses the tab. term and adjusted substitute depreciation Unless on acquisition not margins will otherwise of for, in without non-GAAP on to in to contains compensation rate company's evaluate under the or to noted, expenses, are excludes refer expense Earnings is that Quarterly of presented measures our U.S. margin, and a EBITDA non-GAAP cash to, internal press addition or comparable and operating adjusted accordance website presentation encouraged reconciliations release measures performance income most these free can fixed costs, the development be directly a basis, Investors Investor today's Relations in it expenses. non-GAAP performance, When GAAP. the with Trupanion's variable financial to measures and be Today's

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

hand Darryl. to I'll over that, it With

Darryl Rawlings

first unprecedented in positive our results, We XXXX. going basis compression we afternoon. Thanks, our tell the QX, business, since we margin XXX points. subscription strong pleased in allocation period quarter Good efficient. metrics, Quarterly Across in significant our our don't public delivered improving Trupanion the generated our cash Laura. margin in business. I'm inflation. sustained they key we has whole year, expanded margin fourth highly compression this quarter. sequential made of in Since experienced of free with operating another was expansion but trend the adjusted capital faced story. Entering progress And approximately of flow. subscription levels the financial veterinary

We're the deliberate up We increased years be period for necessary operating across better navigated also and this reduce took efficiency of transition nimble a team will to to structure, The us We and adversity. expenses. to in the and meaningful made more ahead. decision well the operating organization. with which decentralized grow discipline actions set to

drive innovation I to I've team of the impressed our and carry discipline better note, tools today. to also leveraging the On is been committed the the increasing forward that I by weaknesses and expect of performance. remediating rigor. acknowledge our X that and to want levels to learnings our material evolution in with We're also we will reported doing future.

XX%. will adjusted by grow In our we income XXXX, to look operating greater than

flow team of majority As deploying funds of the of aggressive our expand, be value X% on creation growing, do while on translate free rates our year, shareholders. the but for at underpenetrated which one. for every shareholders our Delivering only global basis. this so large annual remaining pets plan these pet so medical positive markets will this We've our return insurance. to more margins an We pretax strong in in past cash intend will in high into have done

the that, with results share inherent Well, the a post-COVID made us environment to per inflation income I'm operating more With team up into I'll in of I'm capable our adjusted and stronger disappointed hand well it of over XXXX setting team. The the year-over-year veterinary and of proud beyond. us has challenges XXXX, headed Margi.

Margaret Tooth

Good pleased the our results that afternoon, share I'm fourth everyone. quarter areas across the showed momentum in business. Thanks, to of multiple continued Darryl.

show disciplined million. and the to on continues Our total a XX% which core revenue year-over-year, ARPU subscription makes across increasing our per Growth $XXX rate increased X.X% our average of benefiting more year-over-year in revenue for growth was Trupanion a speaks even our increased in In meaningfully. Subscription X% increase business product, higher, performance as pet. our XX% margin flow to quarter, up to revenue with business. approved ongoing from XX% expansion growth, efficiency operating the pet XX% grew focus and

line was months basis, our trailing XX on a XX-month for Retention with of book in expectations. this business

our adjustment X of year members of retention portion under are While a excess rates particular matter and we paying this as a attention rate seeing XX%. retention XX% XX% are continue over pricing increase, first our closely to monitor across our rate of cohorts bucket to larger-than-normal increase key we in

with approximately now of And average year-end, had and them have last XX% experience, through year, while operationally of pricing XX%. efforts, for of members this in still at our the rolling had member through we an proposition XX retention direct monthly XXX,XXX we need member cost in rises. our our early over Against through and book. and both in have retained Over remains basis. the continuing inflation our increasing backdrop, XX.XX% the a on education invest this months, We expectations value care the are to increased line around Trupanion as outreach, member

leveraging identified which relates opportunities learn. to team also our will the some This use we're our experience. to member our time a technology our levels. ramp operator. for exceptional expect lower-than-expected seeing system, platform forward differentiator experience look a to low-cost have while With the predominantly member we key We deliver and we take new completion, an rates, of enhance execution as improve Meanwhile, nearing latest service ultimately our members automation administration migration to claims system, we around up policy to

made investments margin was to the control quarter. business from our levels we operating Ultimately, scale well business in greater perspective operationally. our of globally intended help the Adjusted and have as as for with are subscription both a XX% member oversight,

deliberate the us at for. ongoing not reflection our not XXXX. an proposition, surprised I strong a cost efficiencies is will thank member value and and focus and reduce all yet would am meaningful This with While This of drive quarter-over-quarter pleased actions our be any in target, a expansion.

of In this, level XX,XXX in new represents million total, operating same we Of but pet the XX% This adjusted less generated income, to $XX.X a nearly over which deployed quarterly with year-over-year, $XX pets. million marks spend. approximately record. we acquire additions

we expect year-over-year, line pet grow continue acquisition As guardrails. to allowable per expand margins with costs our to in our

While down again, so experienced environment, the over our efficiently, early we're we has majority veterinary channel long our for never Since term. Once time core pleased need the it plan Trupanion is not to during to greater. which an XXXX, for been inflationary unprecedented deliver throttle have the of growth significantly Trupanion growth product. our growth our drove

average continue $XX.X rates veterinary add million new heartland, result leads, quarter, retention to an and an of at ARPU return rate above lifetime pets strong from the guardrails at XX,XXX of to internal estimated the $XX.XX. XX%, value we $XXX and of In estimate ease of cost a $XXX, approximately spent was at new We to conversion As of this, direct pet we of over just average our our see the the XX% channel. pets of of XX%. average acquire these pets to

$XX.XX. see adds in Chewy in, growth pets also collectively our from PHI continue quarter. a added offerings steady geographies, our which American We of powered by newer Within at represented FERC new Direct pet ARPU products, and gross to and new approximately and North XX% we our products, are for approximately pet Aflac, which include the X,XXX channels of new

lower lower these value. overall, which and lower retention noted, As products leads have ultimately coverage, therefore, to lifetime

the the development, for not of we before spent and negative. be these total investment acquisition spend we value for $XXX. our which to stages investment of look lifetime offerings primary operating cost products to is growth minimal. continues early our pets, equating $X.X of in average to acquisition In of of quarter, the these million acquire X% pet Given an and to just just be products these adjusted Achieving a are will of increase level these scale, here. new yet estimated acquisition return rate these margin operating us was internal XX% pets to focus Because

plan. than fully market doubled revenue the X,XXX In Europe, new just International veterinary of yet $XXX,XXX hospitals. in we underwritten thus realized. the in XX-month XX,XXX our we've that the our Trupanion quarter. by our over add and from years, a coverage. is Moving fully mind pets X products not away is last expansion addressable today, to approximately North more Keep invested key are not over these yet part American And

spend market. which annualized to acquisition target believe given cash amount, of in grow is Our X.X% and desire position margin the of in large strength we underpenetrated capital helped with we On the our global basis, $XX coupled revenue, over free quarter. flow prudent an a a expansion, in our generate continue such lower million to

$X over the months, recognize commitment and to them. territory and over choose the to vets as our billion This a team moment frontline to serve pet to business us passionate our and partners globe, As to to includes Trupanion team their grown across for and support in parents we've thank pet to individuals who I X,XXX our XX revenue. Collectively, want including the last from their the efforts take who team. I look resource over back veterinarians and

our income the to continue decentralized share importantly, in of business mission. proud at milestone submission I'm and million discretionary forward and rapidly $XX.X moved and that we to new that pace. all Most added pets help We pets. an XXX,XXX more as to note, continue we aspects very generated advance over to key that the a love to structure evolve developed We best exciting receive the a care. we're On serves veterinary testament approaching operating

of matter a over pets. cross lives In million many and This helped threshold a saved. do. days, the of we we what so is do why lives lot X we should of That's subscription

I'll turn it that, With to Fawwad. over

Fawwad Qureshi

I'm my Trupanion, Thanks, been that everyone. the Margi, XXX and working pleased afternoon, Having great with to first experience with say good team. days passed a it's

I'm about As opportunities the remain learning significant excited I ahead. about the more business,

well year-over-year. XX,XXX XX% the Today, million, as provide approximately as and pets Within year-over-year. quarter year of are pets to million, currently XX% performance pets, Europe, $XXX.X subscription I Total will by underwriters. $XXX.X revenue December which share first increased additional full subscription up was quarter the year-over-year third-party outlook business, up details XXX,XXX in XX% XX, for XXXX. our around for This our quarter XXXX. our fourth over revenue includes as underwritten was Total

$XX.XX, pet was quarter revenue monthly Total X.X% average period. up the the per year prior over for

is XX.X%, basis paying XXX in American business. our reminder, and this proposition North points improvement a of cost value all veterinary subscription will invoices $XXX.X mix business a million, towards the sequential of As of target reflect over was inclusive quarter. of products Subscription prior resulting a

X.X%, of percentage a expenses subscription variable revenue, consistent year-over-year were relatively As and sequentially.

veterinary invoices, a income. up period, fixed to After X.X% primarily the operating in the of prior Fixed from expenses year variable in adjusted due our expenses percentage investments of and X.X%, were we calculate paying expenses, cost revenue as G&A.

quarter subscription of income revenue. subscription margin This prior Our basis operating approximately business the expansion. or adjusted of $XX.X XXX is points delivered up of million from XX% in or XX.X% sequential

a is other have and revenue business our Now to profile and segment, that products other of generally our a which comprised margin I'll services business. from subscription than different BXB component turn

million $XXX.X was operating the of revenue business increase other year-over-year. million. Our an was the Adjusted segment for quarter, income for $X.X XX%

up up adjusted QX and from XX% expectations. year operating ahead In income million total, the in prior was $XX.X QX, period. This of XX% from was

of XX% approximately comprised business our subscription adjusted higher-value operating quarter. Our the income in

book a We partners revenue roll as our lower move one in dollars value in our to other our expect our from opportunity This the off. best, business. this to subscription of us increase continues opportunities business value to higher provides Pets of investment total of percentage as to

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

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

We in million quarter compensation development million quarter. also the $X.X in Stock-based was costs. the $X.X invested during expense

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

$X expenditures in to of operating in Capital In was totaled cash year compared quarter $X million flow, flow cash prior the period. terms million. $XX.X million the

was free year's fluctuations cash Keep million, fourth of year, a historically, rates cash in flow flow positive quarter. veterinarians from seen that $XX an With we free the As in prior flow. quarter. cash we lower approximate seasonal first the the typically the beginning in $XX.X improvement free a new see at result, implementing have mind million

inflationary reason, effect free this are will flow annual be It pronounced. is have an more target. environment, experiencing, set currently as for this cash In higher we we

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

we building strategic continue APIC to forward. One to our improve additional from dividend intend to an of ownership. of the shifting make quarter, entities, cash including final the our took outside During our point. of strength insurance steps our ordinary and moving use We assets held

in noted internal X to controls. in today's expect to As the XX-K Form report we was press annual weaknesses audit, related in our XXXX release material

The relates over change to and program in of certain first information technology the controls, material weakness areas management user systems. primarily access information technology

reporting The controls auditors process. financial pertaining are second segment. to material relates weakness and our internal remains audit with The to our we working over to XXXX other open, the business complete

these preliminary are Efforts audit. statements financial the and full to the of material XXXX completion for weaknesses As underway. year a subject are the result, to remediate

Now I'll outlook. turn to our

XXXX, is we $X.XXX revenue XX% to of planning are grow year full the in midpoint. the For approximately at to range billion of $X.XXX This the billion. growth

are the of the representing at We subscription in to $XXX planning grow million midpoint. range to XX% year-over-year $XXX growth revenue million,

to to We at growth $XXX the adjusted $XXX total expect million income be of year-over-year in XX% range million midpoint. the operating or

by our from to of our QX we expectation within business subscription will shape margin to As the a standpoint the build think year, year. operating XX% similar we about that the and is prior start year of adjusted lower years, back margin a this

our half to to expand our in in in aggressive our pets of we the and our year, free flow of subscription operating be meaningfully move continue IRR higher-value disciplined outlook. within as I'll more will context, capital. cash And our will allocation second as more guardrooms. margins QX business that to within With look be the We while acquiring

fluctuations, Subscription to revenue to Total is year-over-year million in XX% range This $XXX adjusted income represents range million revenue and million. the to be range most of our $XXX the of conversion Total growth the the be in million. mind U.S. operating midpoint. in the subject growth Keep notably in to million. to projections that to to at Canadian at million is This XX% is $XXX midpoint. rate are expected the be expected currencies. nearly is of revenue between $XXX year-over-year $XX expected $XX

we For rate first year at approximate our projections, in was XX% of guidance, quarter and end the which conversion January. a full rate the used our

impact. year-over-year neutral to expect will foreign amount We a this exchange

hand over time your Darryl. for you I'll Thank With it that, today. to back

Darryl Rawlings

we both shareholder as over highlighting gain company, letter. as In insights to hurdles my a releasing accomplishments deeper weeks, our our be the letters few resource as Fawwad. year. our past will well serve XXXX faced into Thanks, These a

encourage hope Trupanion out we in and it. to be recently about those point act, learning facilitate September also XX a For date held read see Annual the and that This I Meeting decoupling interested We greater and Day more you think Annual we participation. I'll here in Seattle. Investor to Shareholder of to how announced intent in change is there. our marks attendance be from to held our The the you behind to June. in-person

that, it for With questions. open we'll up

Operator

Ripps question first from Our Instructions] Maria today Canaccord comes from [Operator Genuity.

Maria Ripps

your ask than consecutive I down XX% for which wanted about to more acquisition cost, quarters. was pet X

of more especially towards your you're becoming that thoughts target But shift. mix some broadly, gradually ratio. Can of of markets. sort some expand PAC, understanding more loss Sort your in you of more kind your as is maybe profitable potentially now on moving aggressive of that on on

Fawwad Qureshi

is you Yes. for your Thank question. This Yes. Fawwad.

thoughts perspective, of the from given So is 'XX environment, company something environment. the PAC inflationary that. a just on a couple that reduced the

we try more, within we're as We XXXX investment our we PAC. are love to very course, see returns that we feel like and margin of thoughtful be guardrails. happens. trying the where very be the the think in we prudent So about more to shape invest of to would of ensure and that expansion

an opportunity then be see as aggressive. feel like say been will a of the expanding we of of would to we that's course And And do the expand we have margins as comfortable, 'XX. more half more the cautious and continually year, more the through the realization we into the more in we they've feel where we're little I get of first bit half year, So that. until second

Maria Ripps

can additional maybe helpful. about you is there very your secondly, recent any And California. Got it. color refiling with share then That's

in improved in And since from between especially can you sort and that requested back context so then. some sort put maybe increase of XX%-plus the June, that of delta the increase has requested stabilized similarly inflation of given

Margaret Tooth

it's Thank for Maria, the you Margi. question. Yes.

in typical think sort approval we of one our The we us increases California. proposition time. is value for proportion to of as to allow population that crises of broader over grow So August California, to is in for continue cost meet cadence about rate again this a and us the got the rate for as

-- it continue since you the year. through way it As wasn't of time, rise that to all mentioned, cost care wasn't that there the

And that rectifies to get between proposition and freight there. increase We're with bring to so where over expect this time, target the working value have trending. to gap value we we're proposition our our them currently us

just of in attention a California over that approval state competitor kind rate would of I the XX%. draw fact of the also to biggest our had

us this not generally years X past is in us, market this So to average puts rate XX% request for a higher has year. the this every atypical over an increase care. to And that new access of

what So latest the that's XX% in and reflected in California cost goods, our is filings. what's seeing we're in of effectively

Maria Ripps

[indiscernible] Got it. annual cost billion Congrats on $X revenue.

Operator

from question Khajuria ISI. Shweta Evercore from Next comes

Jian Li

This for is Jian Shweta.

kind is then much year to into what ongoing have your follow type of I this do on this but through just increase that full guide? up baked Like a price expectations first, the So And flow follow-up. how I you increase process, the of expect year? books to an kind rate of the is of understand question.

Margaret Tooth

Yes.

Currently, through book think increases out have our we about business ARPU, of model currently, So unit. as members. terms our for is our we broken in flowing by XX% price

products So into have mix coming of products we've a as different as we we play. new showed different got earlier,

So itself in does ARPU. pricing manifest the

about more that we every you receiving of get higher increase. sequentially book that as of the as rate So think expanding quarter, business

increase. XXX,XXX we to a members earlier, XX% mentioned now I have close As receiving

we by demonstrating that our consistent -- flowing Now back inflation end the we've That's get which to more top driven of of of to on at of at point perspective, is average. going see got time a look versus margin year, the is on in our continues to line mark. XX% as XX benefit pet we'd to this track of the shape overall, inflation ARPU ARPU to turn count to be starts be of that on from the through. in the book assuming business. And year expect XX% terms in

Jian Li

expansion, of then this about Aflac that or potential And second pivot on the Japan like, the is line like if your it. the of focusing the Got the that you of Like partnership, that? on more before, but And apologies can does view of for U.S.? just addressed talk you why time market that? question, scope also, the out change other

Margaret Tooth

Yes. Yes, sure.

great question. it's So a

at, years So XX-month one exploring a we that with many any the we as to conjunction we like it into. the do And start markets do looking of in It's looking our was at [indiscernible]. plan. us were countries of something we that for number Japan we were go with of were

for opportunity. really it's the research the mutually the time areas. with And tandem understanding territory, that doesn't the we at us After an the understanding understanding other opportunity It's we we not and an absolutely future. our also resources cost across So our Aflac, redeploy impact appropriate decisions into It operations, the in Europe. to immediate moment. were that realized in decided is conducted still

The a lot space [indiscernible] we've hospitals, expanded And addressable of European a now which is now XX,XXX grow to we're that feel room in in that Europe, happy a see is we well. market great our include really to to got for us. total progress going today. we've like opportunity

in decision still overall, line exceptionally continue So Aflac. with with our happy to be and

Operator

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

Joshua Shanker

all were I can but know weaknesses When together? say, genesis noted, little about prior more? do coming material What impact they these -- year a of exactly limiting talk they numbers? was this it might be you you the bit can

Fawwad Qureshi

Thanks question. Yes, it's for your Fawwad.

speak material seriously. weakness a finding us as that a of take I leadership a all we team very think for I of

standards invest And is place in the focused mentioned meet earlier, as the open. to compliance expect [indiscernible]. to also we remediation for ensure continue Right our a weaknesses, is the we're scale company. scale X these We're high to systems still and further internal our we're putting that to in the the in we we top company As processes, now, grows, audit planning on for material ensure operating and to own our controls for standards.. to priority

Margaret Tooth

add. aware issues financial not as are results result of a related of Yes, just today, to this. I any as we of

Joshua Shanker

weaknesses in already in Or present did prior emerge this periods? discovered the you the company they past in year? with And

Darryl Rawlings

Josh, Are, this is Darryl.

As been billion crossed company. mark, scope the the scrutiny the we've company increasing $X across and our

So this all areas was scope. of increased

Joshua Shanker

Okay.

noted then from among And you Is bottoming high go that sort lower price increase from the do -- there it -- bit mentioned XX.XX% think a of out? Okay. cohort I XXXX. $XX.X that that monthly think, persistency. in could down That's here? I a is million, you Or

Margaret Tooth

No.

that expect. overall, counting been. is has think typically This XXX,XXX is it It shift got this little is that have gone bucket. significantly Trupanion. We've at obsessed we a bit through our of shift, now something lower I XX.XX%. a a than higher in we members with than It

XX% don't As flowing over we you of have business. typically through know, increases book our

results increase. far. to decent some good improve feel anything be XX.XX%. have that able people to value got fact we of we more an than this to through we've because high certainly book of good But overall, else a it's seen expect that are, ourselves hold we've feel of and think we'll number about rate proposition. on as And on going high standard, of pets there. we going so We have that the a we other continue symptom I the focus number through we I to increased don't of we'll our a pricing where But about the think

Operator

Our next question Tunis Autonomous from comes Ryan Research. from

Ryan Tunis

view the adequacy today I'm broadly, I in today? the thinking I be places rate should of subscription that that qualitative there to are Is relative you're activity book start the you've guess, just I for a rate like about mentioned you kind a do of where we XX% of in I looking kind year? thinking? of discussion need year 'XX is taken guess terms of the be terms loss going trend. it what similar of the think you Or rate of to mean,

Margaret Tooth

Yes.

this expectations we've far XX%. veterinary line of inflation in, our with coming year, in so the So, seen

combined through flowing rate that of end of XX% this things on track of XX%, at of we have get the year. target annual X operating to margin to margin We Those mean adjusted our are by XX% point business. nicely our book -- the

to bet continue rates many costs, we'll mentioned good we'll hitting beforehand, the all our we to But closely, at expand. that for we seems more trajectory through. year adequate target. consistent as more members refine our get the your XX% to will before flowing with the prioritize about -- some and of that as Does grow our continue we to of monitor We as to year. think we be The I question? we cohorts, I the feel ahead. acquisition. good ensure now pet into as start invest our across look that have pricing inflation by large, that think those are I margin growth But last and rate answer by And possible and that we can can

Operator

from question Stifel. next comes from The Block Jon

Jonathan Block

adjusted XXXX growth the income, to the XX% why to start XX% million operating million Maybe guidance, it $XXX I the just wildly XX%, seems like think, year-over-year. on $XXX to is,

towards [ can about seem XX% you like the So would seems ] of adjusted high with Fawwad, the Promore's land I'm takes the end maybe but you the you're talk it to comments, end. that or low what recent year, And in the to by [indiscernible] confident is, what ROI the end? high you struggling end

you letting $XXX through moving million? those to confident million? you What You to million? at the what could to $XXX and you $XXX walk that walk So letting that reconcile maybe is seem are dynamics Again, Is that are it just it. takes takes you could through the that million? $XXX dynamics of Maybe parts? you XX%,

Fawwad Qureshi

Yes. your Thanks question. for

of couple things. a say I'd So

things subscription think inform because guidance business, obviously, we And market. huge repeatable. our I of the underpenetrated a of that majority our have the revenue then is our

revenue expect growth. we So

growth you similar revenue of attention went the XX.X%. showed comparing you paid things XX.X% accelerating that compare business, is that do the subscription can you if analysis that 'XX, 'XX, our increase I then QX then was a year-over-year a whether which 'XX, QX, QX just And if to to if is think XX%, was look I compare QX to one which to we XX.X% so or it 'XX, decelerating. at --

us at that If revenue would of you QX, some our guidance rate continue. for that growth acceleration gave look the confidence

would achieve So margin high sequential we certainty seasonal the that I a our also aspect in a improvement us to those that, be can gives is of, numbers say, There combined forecast. by year-end. with degree some to that degree of going high

year, you are rate first there's dynamic. year frequency. as X% in X% of In also would have normal instance, the free lower see the through any where in a put cash year best half rates a see higher you flow, inflation, So for that to as you'd

an dealing inflation. that Obviously, higher significantly we're is with environment

So rather the sequential it's guidance. of in a year. making down X- more then margin, That's than we the progress a terms thinking more X%, QX so to impact as the and to of X-point have in go say, looking you're X% at behind through

Margaret Tooth

as it's a touch is that the add XX%, on the as just think on seen, margins. impact thing to if that consider we If other that XX% inflation it that have I Jon, that, goes obviously, point. And to material to I'd can very we've

feel things good about So at where this trending. are we point,

the of you context guidance. hopefully gives on with just So that a bit

Jonathan Block

that's That up past, I'll questions helpful. also increasing And maybe I inflation in try follow guess you've I penetrated. maybe to that's but the the and about demand well, declining a down for X% X offline. pivot as year-over-year, then a pet market that's adds just in also adds with jam the your gross was of and here. But -- quality again believe in Okay. talked the with XQ gross were 'XX insurance and can I

to So are just Maybe could the were like time total that subscription how you -- hard XXXX doing dollars you seems pets from It a having were but perspective? And about talk Q-over-Q, subscribers a you XX,XXX deploy. up share Q-over-Q. separately, I'm then up reconciling. slowed as

other Q-over-Q, were XX,XXX So were sequentially. other revenues roughly pets down yet up

roof with the through as walk maybe went other? that thing ARPU you Or an like could just that well? through is that So

Margaret Tooth

Yes.

take part of can question. I first your the So

inflation overall So demand for in of in terms pets. increase

you our the have we've to prioritized on as out really focus team And lifetime within compression IRR that of to you going X the is with this the growth. and margin very guardrails spend diligently those pets. on we we brings supplemental, is -- is exactly PAC have in when with the for operate reduced. back always can focused we're impact get down what done What year spend has really That it the money and us, past value on to is. acquire the as For efficient pull levers areas margin know, all seen where we guardrails naturally because document to amount that reduced those that the months

that dollars so that well. are allowable means And pack the reduced as

So therefore, can -- efficient. allowable dollars down, to lower super still spend. when that's efficient add less growth our There's go our there's money

start to to expand the margin expect fully expecting to will of adds margins down. sequential to gross as those trouble from second QX. to QX half enter see We're year. So We

typically year. the see expecting beginning the at of that that we're inflation So would we

be inflation. will mentioned, normally accelerated Fawwad XX% by as see double we'd As over well

So start pick flat, if you to they spend assume our QX, then up. for QX PAC somewhat be picks up, will that means that margins

strong and So channel, We're we volume. our conversion retention that good about good veterinary core through rate future feel rate channel. We're state. seeing lead seeing

part Heartland, terms market don't of did a feel then, overall good I about we think have the asking think And as your repeating that In just the question please, which part again, the and We talk of veterinary Darryl, mind Jon you pets. subscription were pets would the to market can. so and the hasn't shifted still want we share, I about of -- second we significantly. you other channel you to question, that.

Jonathan Block

sure. I you to Yes, it's out, $X.XXX hard it $X.XXX that from data page I your what debt When at tell is, some mean, but of the total million. look break up million, were you

sequentially. So your up total are X,XXX pets

XX,XXX. up are pets subscription Your

XQ XX,XXX is the other sequentially sequentially XX,XXX XQ pets of other right, was yet reconcile to sequentially. being down from revenue, your despite your sort So down to other total, up

if were to up because at base I'm of that they And why? back yet if in the time. to other as other -- ARPU where a other your that that take is pets place that from is, and for So asking figure I'm so, a comes ARPU are XQ, XQ, of notably it's period up does how lot revenues an trying what out

Darryl Rawlings

Yes.

can with of seeing when year, of would revenue in is take other business what look a it's I up subscription. throughout the think the we in key of at you But the think you follow shape terms I question I you on opposite the see Jon. the to away that factor you're me

business rates, that subscription, and in follow in of count we in pet accelerating in terms seeing diminishing. revenue. you terms growth with of But other can the the how certainly manifests lag then So landing change between up in seeing we're you're

Jonathan Block

X/X right? mean it's it's your Yes, like pretty I of bids, straightforward.

from ARPU the other the I least to XXX pets It's to happened up time hear. were in revs that sequentially. X were down, know, Q-over-Q. what Your went possible? that at the to to pets is XXX,XXX XXX, is XXX,XXX years other don't first I'd love How What probably

Operator

question from from John Sandler next Piper Our Barnidge comes

John Barnidge

You in quarter you mentioned the about shift in ownership. Can the building talk that? a

Fawwad Qureshi

Yes. question. things. so Yes, the Fawwad. of there's Thanks This couple for is a

insurance the PAC operating sort we opportunities have our you we from And then creating entities. that the look things. it and at did try cash advantage take If can to for business, of really, deploy in as overcapitalization of was X we of instance, the

our an rates, and the for took we income. from to is opportunity entities. operating portfolio. that on now So basically our perspective, have contribution our our insurance entities then building existing ownership a building which interest dividend, based With be we more the And MGA is between a interest higher shared accrued meaningful ordinary

increased that think with consultation can was growth of so higher dollars of insurance regulators, can then business. it to return use entity prudent that in frees we our again, cash at assets. thought by ownership, a up And our those for So we rates We we MGA. reinvest purposes operating the used be

Margaret Tooth

add just to would I And that, John.

One of was the for reasons very we bought the purpose. building in place the first this

So that as to realize it to to activity able happy comes be fruition.

John Barnidge

any there was occurred, in that change of building? valuation the When

Fawwad Qureshi

No.

Operator

next from our comes Raymond Wilma from question James. Burdis And

Wilma Jackson Burdis

scale? for that? of guys pet How insurance anything need on view in any There's Would you consider rollouts do industry. lot like the a acquisitions, going the you combinations,

Margaret Tooth

very mean We've focused in. number channels much I No. a to and our of products core got now, and that invest growth. different right we on we're I are think looking to grow continue

have And P&L looking looking We those there. priorities at terms within target across at and continuing our to to different margin return operate guardrails, profile. scaling of our overall in

have past. in the made we think I acquisitions

that think building we've been has that not certainly -- We're our moats I and years, more. I with continue And were over it any they some not growth. think owned looking the we'll big first we've been done. have do to pet we

Darryl Rawlings

and as But veterinary of prioritizing just we -- that of team return rate saw rates quarters We're consecutive went now of a I'll can of we we this high deploy X internal can have to Yes. we've able X capital, we seen through, of growth. above the lots has get margin very add on that you see, internal been opportunities. flow XX% And return, cash quarters margin inflation free expansion. compression. our

we so to really in deploy our We our fully sums high capital rates at that want greater see churned. these channels core expand of can have margins

strategy. overall our that's So

Wilma Jackson Burdis

any maybe And movement you the with building? it. via the dividend building freed did I ordinary this, guys with both how and if much the capital missed the up Got about talk associated you there is

Fawwad Qureshi

that. a there's So of couple elements to

then that's you balance balance we I QX $XX.X get our use for million, our we would And of normally there's of insurance when then look entities. million that the dividend walk DMGPs our costs, ] QX us from earlier, that of took and [ part And as at was we said expenses, $XX.X complex what beginning be the helped So $XX.X PAC. that from claims, give whether cetera, the to million. center the that it operating QX fixed the including or et building and

Operator

be And session thank today's ladies joining as well We with concluding that, as gentlemen, conference presentation. and today's for we'll you question-and-answer today's call.

lines. may disconnect You your now

Trupanion (TRUP) 15 Feb 242023 Q4 Earnings call transcript