TRUP - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Trupanion Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Gil Melchior, Director of Investor Relations. Please go ahead.

Gil Melchior

Good afternoon, and welcome to Trupanion's Second Quarter 2024 Financial Results Conference Call. are Qureshi, President Chief call Officer; Chief today's Fawwad and Financial on Margi and Tooth, Executive Participating Officer.

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

use non-GAAP review filed in and statements. depreciation with from to these the a will Investors facts in GAAP. not begin, to Unless the we excludes expense. discussion in prepared on are of These operations, those measures cost discussed. non-GAAP to veterinary for Today's adjusted weaknesses. financial Securities but management of U.S. noted, cause risks are measures including, term compensation inflation statements rate of addition stock-based recent could and well the are and the release new opportunities acquisition expenses. forward-looking that company's pet forward-looking is ability and and reports A without accordance of and to, non-GAAP financial presented performance advised other remediate statements and are income, included to future with are references expense than performance, risks substitute limitation, adjusted today will our return, Commission. otherwise encouraged which operating materially before another X-K involve degree that paying margin statements. Before When pricing or press Exchange found expenses measures and of statements and to these and today's performance, uncertainties to intended to remarks results, earnings our our the industry non-GAAP most as contains as internal statements financial high of limited and evaluate actual uncertainties on the unknown the veterinary non-GAAP be or results today's regarding be XX-K Forms and basis, contain margin, company's please to comparable earnings All differ invoices, income refer can uses other directly our of costs, the tab. or on These website historical Relations margins known detailed that development reconciliations be include, to material and a EBITDA we variable in cash under expenses, Trupanion's which operating fixed release expenses, operating quarterly acquisition GAAP adjusted measures These free Investor income financial flow. most presentation

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

Margaret Tooth

decade Trupanion. you, Q&A for with of across an many call of for all extensive a leaders Good by you I'll first afternoon, at the join joined company, Thank forward everyone. spending my Gil. with to today honored the upcoming session. look in where I from you September, be over Investor am business Day CEO the as to I After our time

financial was our X the quarter a results. in strong company, on moving Now Quarter as markets. to shown key our for

market, large helping the is business. to guiding In to faster expanded adding Modulating we XX a Trupanion since in at achieve growth, focus Our more engine our the subscription Within and increased growth and work continue pet years quarter, the by count ARPU by increased pace our XX%. by And components financial business became subscription and of remains from this year-over-year, of mandate. as brand, we underpenetrated and team XX% target value a ARPU revenue publicly Breaking remains behind X%. ago XX% our between of the XX% our business. year-over-year. even record a proposition segment core pets in down pricing this increased traded our

we XX% time, members quarter increase perform the migration year-over-year. and and have this some a reimbursement way. last demonstrate see automation sequentially with the to on average our In inflation the known. our pleased both being and product, and had was our on focus this Retention experience reflection our in the cohort our of Trupanion member and from was for quarter, member those to However, higher so new results to with in Within to more of XX%. months. our for approximately of lines is pet these our been our veterinarian administration pricing XX we leading has experience These received for paid time benefits Trupanion to only improve member and remained confident our do retention initial consistent at directly the which upon and deliver book platforms. includes proportion in proposition the through We're our up This communicate well we're core approximately the lower veterinary Trupanion claims lower This of half months. staying being also claims record our XX some with a paid can development coverage results, a with technology a Against expectations strong us when the we're thus early or traditional we over the for with XX% and more backdrop, products. retention that will to quarter and pricing value benefits system continued of new over rolling experience. pleased in efforts

in received on our Investor We in states X to performance details are that approvals September. We expect of our these with effect. take road ongoing rate early more and to largest investments, the metrics beginning our provide meaningful upcoming experience member recently at you Day map

our year-over-year. take should in funds quarter, first between And and subscription we've pet represents acquisition. grew XX% in XX% XX% to XX% allows reported will in to enable quarter. for an through acceleration segment we book, invest growth reestablished at estimated us growth. spending increase that even these faster run for the that funds and the grew represents from rates in to they returns new to the income acquisition income operating operating we these pricing have these time the our on While now Adjusted XX% growth regions Adjusted pet new

of As a margin towards quarter, marked XXX goal XX% basis to the subscription adjusted in progress revenue, adjusted points our operating of expanded XX% percent margin. operating

our success. the and for veterinarians need guardrails and highlighted our due their to XX% industry veterinary an As of and growing burnout by IRR target fourth XX% target rising track to The positioning we X care, margin pricing help we the Operating of cost inflation. At this come. remains what within we'll the profile pets, for shortages sustainability to the health remain to pet on quarter. our us the critical work. veterinarians veterinary hit communicate, in and ago, the the we to noted for of has decades of time, parents business, validated increases, over ensures profession estimate teams since that our the to years been staff business

industry can will their solution guaranteed had because on XX/X, Our with a product a relied unique and value plus fixed our and created plans, who dependability and birthday. in make model for community. the members sustainable aspire a that's This ensures the without the increases the a single-digit pricing the rate comprehensive core of proposition is to our by need prices for This that pets customers aged that for established pet in long be they we recent higher mispricing. our simply By delivering maintain across approach. model. way across to coverage our pets the lifetime this a removes to. annual Unlike Trupanion, low satisfaction rate the without has to competitors put trust last, enrollment designed same there as veterinary simple, inflation the difference offering We've have designed with to the claims benefits veterinary higher not our pets same care we a the due and to receive and players tested provide It members, With best can value. demonstrate over attract markets, or This we in exceptional with resulting coverage pets Trupanion's insurer low margin need, to cost outcome insurance now has overall. way. reports most to importance payout. are limited both and the customer landscape value approach we underscores our sustainable comprehensive and of quarter, or pets every be a from coverage their us. coverage addressable coverage, very adding pet long-term unfortunate, with business approach go past penetration Yet The lifetime the the prioritize XXX,XXX is of of

second return to in quarter, turning on growth. an a goal sequentially in margins acquisition XX%, mind, This estimated of XX%. spend of back our acquired to represents moving rate in the closer pets attention of move pets reduction we're our XX,XXX As XX%. that pet a new internal of With back at pleased to we be XX% decrease year-over-year to

While deploy to more adjusted afforded approximately of versus X% our our we're opportunity use expansion not operating for the income maximizing us yet growth, impact margin QX.

Continental powered our the given adds quarter. early in spend, the these gross acquisition and life pet suite against products pet capital of a of million products just PHI ARPU approximately Europe including conservative Chewy of our Aflac, $X.X our initiatives, and Direct, are new subscale. and and of in medium opportunities, low by newer Our our cycle Furkin our these products, deployed in with and comprised XX% We amount XX% products

increase and than with In Rico which good and in goals. is most U.S., of acquisition to our solid more pets. free of equally pleased of discipline to our spending, mandate flow coupled remains and less the quarter. hard continued led our in cash low we're team's pets margin flow work margin Europe, summary, and free bodes X% The for insured Our well the across the in enroll on results, Canada, Puerto With number an cash with quarter. million $X execution showing

and We do gradually scale spend margins so will up to prudently, our prioritizing expand. acquisition across accordingly cohorts as continue

briefly I'd Now approved updates to were touch of balance to calculation before to the significantly factors decreased an These National NAIC. Insurance Commissioners, update the by in casualty Association of I Fawwad, sheet. recently underwriting on the risk-based capital our and capital important hand intensity over that like the property

pet its Trupanion insurance line forward subject that, as to With business. provide recognize capital at than a risk-based X insurance factors of same own the more big QX own update, over our of of Fawwad was After to continues category hand within insurance and results. large. this pet I'll overview designated special its in the to pet is right, step for detailed be property, this decades to requirement to a discussions Although as

Fawwad Qureshi

afternoon, good and Margi, Thanks, everyone.

growth. of CEO assuming lead of phase begin the be Trupanion. me I'm Margi into with the Let thrilled to of by Margi to role our company congratulating on working next

was the $XXX.X help of of to XX% revenue. improvement year basis a this our mission the business, monthly $XXX.X opportunity was parents XXX for I'll year are quarter driver pets was third our months subscription million, the revenue million $XX.XX, up XX,XXX value are underwritten joined period $XXX.X million, was average parties. as retention our the our primary expansion reasons of and ahead quarter for actions. X% last was and results million, quarter includes business in basis, full point in QX year. the currently quarter second was Europe, with resulting XX.X% Average the or XX.XX%, proposition the third to income improvement trailing prior Within veterinary up of Our of adjusted for subscription paying the and outlook pet pet subscription for year. This by XX.X% invoices first this XXXX. year-over-year. increased revenue Total which up and XX pets was also quarter With pets from year from in On margin period. with benefited from XXX development to X-month over expectations. June retention approximately revenue Total basis XX. a ongoing as I down monthly approximately revenue period. to the company. pricing a points Total per year-over-year. the The up was over prior as The reflects prior Margi year-over-year quarter X,XXX,XXX strong trailing of The cost the operating It another $X.X XX% quarter coming of that, work provide of turn versus well

the proposition Our subscription and expect this business to fourth XX%, in remains our target for value we quarter. achieve

period. As prior X.X%, a year up year revenue revenue, from subscription variable down as a of the in Fixed X.X% ago. a percentage expenses from X.X% percentage expenses were were of X.X%,

in fixed increase adjusted After continues ongoing, our spending Our weaknesses with cost be on and of remediation veterinary and expectations. variable operating line expenses paying expenses, we work our income. invoices, is material this calculate to in the

subscription of of Subscription expansion up income increase approximately This operating XXX X.X% margin year. Our operating million, subscription points takes represents from an business of basis margin adjusted year is revenue. prior in last the adjusted delivered XX% pricing $XX from hold. quarter as was XX% of year-over-year and

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

year, other a million Our operating decelerating by partners, is business Adjusted growth enroll was with XXXX. to capital for segment was adjusted different this This QX, from our Pets driven lower consistent requirements QX, XX% $XX.X their is higher-margin of margin. profile. was year expected adjusted from X% of XX% Best income. underwriter. an up has last for the margin million, Best, income The approximately a XX% business This one year subscription continues new as increase our XX% this for and $X.X revenue gross of revised decrease in up last of is pets from In $XXX.X quarter, the segment agreement operating within year-over-year. lower a of our expectations. our million In which full and comprised total, with ahead our income QX Pets operating with in

we pets quarter acquired deployed new earlier, the in $XX.X mentioned XX,XXX Margi As approximately to subscription do million so. and

was that the XX% average to are acquisition this return in of third year in quarter, $XXX by period. from spend cost the $XXX XX%. with quarter, new X,XXX pet line a party, an of approximate internal the in of into pet Excluding translated slightly down XX% estimated per the pets European our prior underwritten The in on target rates this

in primarily Europe. We in expense quarter in our development the expansion $X.X the Stock-based relate to also compensation million invested during was which million costs, efforts $X.X quarter.

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

in expenditures the cash was million $X.X $X.X in last In flow, $X.X QX year. $X.X flow cash operating million, million the a compared down negative Capital year of million to quarter terms from totaled prior in period.

year $XX.X quarter. As million a improvement result, free million, $X from cash the prior flow a was second

half with cash last the free mentioned we in generated As the year. our our in of earnings call, majority typically flow is second the seasonal,

third compares the last $XX.X an progress negative generated we This $XX are represents that and flow goal have million particularly highest great call, since million. X we X.X% achieving quarters. of am at flow million this making free improvement X of with now annual execution So quarters revenue. are our cash went target pleased an quarter, towards company we On report this the the flow earnings XXXX over pleased the our and to of QX I to free cash introduced public. in a quarter $XX.X free cash previous

cash million calculation in increased has than in held the $XX changes Turning due subsidiaries, We investments credit Excess short-term risk capital other NAIC. short-term as an insurance million well more factors capital the end our our balance sheet. recently of we quarter, requirements which underwriting in of risk-based additional ended by cash $XXX.X was requirement surplus to $XXX.X slowing our to by the insurance $XX.X with capital of investments. capital million. our of year-to-date million the as estimated to used $XXX.X and risk-based business $XX.X approved of entities, the available At million million our million we facility. and $XXX in maintained Outside quarter the at under the with growth

expect upcoming discuss changes turn during We in Investor I detail more our to Day. outlook. our now these will to

billion our We or full account are the This guidance, half. in the midpoint. $X.XX updating to at range expected year now first takes $X.XXX be to overperformance our revenue which XX% in billion is growth of into

revenue, $XXX which range the $XXX year-over-year. growth slightly and range narrowing be now are the to and The is midpoint expected of million. represents subscription We XX% for million is between increasing

be guidance, adjusted expected $XXX our income the million We to now narrowing of $XXX and million. are also operating range between

which the the are range, midpoint year-over-year We XX% represents raising of growth.

increase through expect margin a move of to adjusted our that we QX XX% build will the continue this as back year We to operating subscription in and margin year.

XX% of million. range to of year-over-year to quarter at are be to midpoint. total in $XXX $XXX be third be the expected million, million adjusted the million expected growth revenues revenue income representing the in XXXX, Total or the $XX million the range to $XX operating For of XX% range expected to $XXX year-over-year is $XXX growth is to midpoint. the of Subscription in million at

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

third of Margi. quarter a the which in at I'll rate full For was projections, June. the conversion to hand our that, XX% approximate and of XXXX, we rate used back it year end the With

Margaret Tooth

A: you Fawwad. Thank

September Before we hear us execution X-month of a for to first in This in invite our like upcoming join open the for forum. Investor to Seattle. members leading Q&A question, our investors from XX take plan event opportunity directly at Day and our on we'd our great you headquarters to XX over an is team annual

We open you found PAC. into seeing progress such on of retention be key metrics rates, Relations The With registration and we'll that, growth, pricing, activity updates it including pet for Investor website. each to our team More details, P&Ls will our I many provide questions. and across and as there. look dive across up of hospital forward can

Operator

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

Maria Ripps

deploy of expand your California, your with a share geographies? customer And now color you when or the new should acquisition strategies efforts sort of now? around to approval are your these impacting core to rate bit And there your little can we instead may efforts count? maybe techniques you new of be in So overall subscriber plans see that planning in any sort more

Margaret Tooth

Maria. you, Thank Yes.

for start pleased California, which We've repeatedly X for to terms expand get those is be quarter. our during we overall us foot feel that to of So now over most the mentioned, hoping I markets grow any to ensure obviously, the very marketable to work able approvals the market we most that that in as cohorts and stressed of gas sustainable we're priced of state exactly of strength, XX%, -- put now North really addressable in on America. with is were That and for. different really for our appropriately margin growth. We to with big have to country, we that way does what the

primarily So sure we're lead part at reality the second point. looking sales strong ensuring channel. of the that in leans is gradually which why spend, side the really of forward is then which And into making through development they of pulling The looking of really the have that to your both question funnel, that from conversion reinforcing really and Trupanion expanding to terms education, a understand California. vet people funnel, into we

health with summer people pets, they're to what we're like few the us, those pull funnel. for months in we're into the that's I on is very not of getting weeks, to about grow. half the been the across market. starting up, expect growth out. more happening expanding this to said last year, good the California, are back start of line that over as more development people And the see the pick through we then looking So They're pet expectations move starting to lead but thinking at just their as towards in we've much before,

year in show expect I'd and into then back fully well. as QX QX, to of half growth leading kind So predominantly of really next that up the

being come the to that excited more, really we able we coming on see foot as back. So and to gas put lot a margin said, once that see through our to start

Maria Ripps

sort That's agreement largely specifics, now broadly again a that it's revenue? why you just very refresh Best, helpful. higher-than-expected the without Pets of are broadly, secondly, Pets of it. Best? getting of And if can by of acquiring versus other us then driving Best driven you Got with And of lot sort what's economics about you maybe still can maybe talk Pets relative into previous your sort on

Fawwad Qureshi

I or quarter was question. Sure, was other business to Best similar can Pets take largely QX. from The that

Revenue in repeated So was QX. growth what roll-off was Pets. driven continued That we about talked QX itself ARPU. by of in

revenue off is our increase to Within So to our rolling pretty the range. related secular in decline. be expectations business majority of ARPU. That continues the expected much is within

going a say, So I business. on that the we we was would in trend first had continue forward. basis, that single-digit to see year-over-year revenue quarter where This

So secular Pets that to rolling speaks and continue. the to are as off, it downturn we expect again,

Operator

The next question William Blair. comes from Brandon from Vasquez

Brandon Vazquez

won't thoughts retention the are a are improvement I up and back guys your if you fact we First on one, rebound we was that you correctly, decent I the heard increases. around the have of a and that year-over-year really and go on backwards. up that you basis sequentially. Kind still trough said and in of curious pushing of price kind some think, despite retention through curious -- Kind here we're you if even what's think driving hit

Margaret Tooth

We pleased retention. with are very

been goods higher Those level. I product, inflation as ] would for that coming we've one now are think through the flow know value. expect in our we members driven the about last something are high And months, cost something of see looking a rates it's we as that's as rate that XX renter through. for [ with that talked that

and about teams of doing proposition, is increases. talk been have a the our lot educate through, into people the rate with Trupanion terms the which their go into to in helping start why vets So and leaning reason to really of back help value the into what choose pets when does veterinarian retention, leaning

the now the is For group over members, member bucket so that of ensuring about it's largest bucket. XX% us, in our largest though, retaining

has gone been the over as and more rate evolved XX through, months the last has and where that's has across the this business. So focus more really

manage depicted through, contact a has proposition value as member the business come ensuring element we perspective, center of that is every of point view, claims right that in from been a the communication the way. from So

For say in journey, the received we think would of hard us that over our members now now, size have increase. rate have that high I tell is approval, we level sample XX% well rate you to where that I are it's of but

rate So bulk through at And that suggest we're be XXXX, gives of a come we needs assuming retention at of the and that approvals that ago. to And -- assuming return and to data in used inflation this to New that. look point, months rolling That's those its to XX means high-level which rate expectations good point. some York be rates we to should have consistent this having lot remains forward with part more to those through with California, high history on. then we those more in QX of us levels confidence of of got XX, able it ultimately of

retention we So of and believe that giving industry in pleased good about we double on the the focusing progress. highlights be vets the up. to And that overall, have in we opportunity very market the and and front that it have still We're not the us. we're this. keep of that We

Brandon Vazquez

a And gears bit. follow-up, a maybe as switching little

remarks, maybe do of that and lower range about you're the you international. back PAC XX% more a the into increasing the has talked PAC, to prepared us start little talk maybe about to some IRR gotten of about which little putting the into? options, buckets bit I know a cost Now bit XX% kind you in talking your

then see go, the do to incremental usually increase, that how the adds? it and that pet we take as starts to does flow reaccelerate through start dollar? So long where next And

Margaret Tooth

we now includes, breed, map by granular So which very you products. we other as cohort will a pet at cohort. look by geography, pet, of region is go level by those What species, mentioned, region,

of take about will to and of it For does a being attribution take it PAC depending length them terms it's and a combination to single on what us, and be in those to a different convert of -- lead funnel. And pull pet channel. dollar what the it's acquire that through that every time journeys deploying the diligently, does

at to will mainstay noise that. educate So media continue in little a of parents and for line. pet bit our do We'll channel always been, us, vet go going the we to has more where terms ground level. you're seek a perspective see to from suspect I be the above the

but to not as So through that That reinforcement a bit us brand. brand see of also retention point leans credibility perspective, a from a pulling it and as little well only people helps from conversion people of view. the

In of right right that very we in pets in terms the have we diligent products, times. been at ensuring are products the acquiring

You products note newer lent to to that I we quarter-over-quarter -- suspect said products the discipline growth see we And PAC when lean level. returned that of our any there to can reduced actually I you'll that those we'll especially as which pick the like and as at back high as half the see continue of to at has fact up, other into from We'll our to really starting that QX that year, into in forward adhere we quarter-over-quarter return. rate look and a into But is core. growth our of a XX% XX% internal this see.

Operator

from comes Piper next The John Sandler. question from Barnidge

John Barnidge

is Margi, Thanks question, pets. experience important Good expectation in participant XXX,XXX products Margi. and congrats penetration where afternoon. a Member low. on for comment your the that market My your the the market is What's dropped opportunity for about market out good to product for experience of backdrop acquire in a books rate opportunity have a customers other create pet in -- does it penetration? market that some? participants rate need for to in low market And with an ensure the the

Margaret Tooth

leaning that's category hurt the as that never want We helping back from when say. the category anyone Yes, in experiences a to you were a underpenetrated. good obviously, have We and us, bad people for not to 'XXs experience best have adopters that's from early had. experience in outset. the is into thing poor this history We're a know really growth

behind are I the them be that do those into It the here the need horrible an players to for a you think pets. veterinarians what a parents. And situation from help and that's as the learning pet really costs industry, category those such is get able is, understand as for and product Trupanion we first fact to to sustainable. pricing fact as leans have into that go got that reinforce creating the foremost,

pricing allows enrollment very clear and only that people do. to us the thing do the aged an It's industry. that, in of very is that for the Our not to vision pet. have a unique We're easy lifetime that

of seen quickly, if I into for you faster to are count grown terms in. last about than and They've we've we're coming that being right. the X ourselves of be. ahead think the hurdles Even the have years competition. react. XX ago and natural over very significantly member you though should pricing in industry, experience they've us, for a slow, their the we never over making not got sure I think pet being going this lot berated that we a were chase to industry value proven that people we what think it is able And come the We've months of lifetime

is for of that comes pets, think the doesn't those have for of the share those it's lean Trupanion we pet. I new preexisting pets and channel. a into challenge. that a puppy, now best that preexisting everything member them. best conditions, fact or pet the the having think the we'll that when will The without cover that coverage can We're for it vet a experience life member that the set are we household to doesn't that I the for acquiring a have experience. here conditions continue to And We'll Many instance. kitten are pet or to here up at in

on be got critical. focus come too. we're has others we'll that happen think hopefully be us, continue others. that obviously, point. to And that to starting we've It's and side I it's that to the point. message just I And on So I everyone hope got early And proven to of see this them for entry think other doesn't will that that for a pricing out to

John Barnidge

numbers follow-up question, a one. maybe My

the financial results? And see where what we that material X the the was in size On weaknesses, the did in cost of it quarter?

Fawwad Qureshi

You fixed see in cost the expenses.

were expenses fixed elevated. So

model we I company of a think have one we advantages a have clear is the that P&L. very as

lower fixed expenses remediation as well P&L the cost expected, a engineering as CapEx So in the of weakness. There's and material One They to the with There's that resources the talked primarily about operating call do work. revenue. technology support to bringing you're within of ticked model remediation from a because is so last because external We related remediation of development. the then of perspective more it. technology. expense the MWs maintenance higher more calls effort versus to to some couple controls some one expertise. And on around versus be actual and seeing X% higher had are just for up dimensions out as other

So you fixed see it then expense.

Operator

The Stifel. from Jon Block next from question comes

Jonathan Block

I up, the one. the unusual sort other Maybe step $X just base. and first variable roughly believe expenses was Q-over-Q, million low of an up like

change. like call it, $XX $XX.X million million and $XX million to So $XX million to or

that I'll then from, believe magnitude the core. opportunities other coming I on of when the just the one are newer shift is sort could American in I some adds stepped follow-up. shed gross XQ. down streamlined. subscription, could at XQ refine look that I And gears better, you not to as of to maybe up? And sequential the ask light expected Q-over-Q in of the just sort of step sort if where the and like shorter you and So North add some XX,XXX I and then materially to worse of X,XXX not maybe just color from both those, in get you that plans a channel And change and of

Fawwad Qureshi

first take can I on one expense. variable Yes, the

sensitive. talked about past, agreement is we've Pets the as loss in Best the with So

ratio insulated variable higher our do loss to in expense margin higher had either Rev this case with relatively is or And expense. from commissions. so higher

consistent about with As operating ratio new for being expectations margin. our call, That's that flat there's loss I the the earn. a was rate largely It new down, the on QX affect QX. agreement. our that QX flat being based relatively coming that That's to quarter-over-quarter. In doesn't higher talked run business

Margaret Tooth

And John, gross the adds just other and on products. the

been leaning cohort is what new we've products the learning for makes one things a us. really of with So that into those good

retain those So they leads ultimately how both to get and and learning them. pets are also We're newer. convert

pushing want of best value. What some IRR to we what's looking our is those constantly rate we're there during understand that at much lifetime are too the for products. be realized quarter to still don't we So the we in that products get subscale, as core more so

back but balance the core, the right seeing way. at you're to moving So growing also really looking

stickiness So are to distribution going would have channel enrolling that not of the that that to. are as we we we be and realize who test and typically some refine from new used a new pets product perspective,

looked pets. the growth PAC we're slowed deploy of So that get do have some there. really right the the down we in to deliberately, teams mix at that way how best progress making good really very And

now that having always about return rate we're a that these of geography, ultimately. to beauty different We depending, just is these distribution do one don't the channels, grow leaning in have one So XX% and different that XX% to product, country, have internal of we one but choice. flexibility thinking into products

Jonathan Block

question, vets. question Your earlier, follow-up a different competitor from Helpful the asked pet that that color. been And veterinarian then the just from reaction of going that was but so off experience is the what's but or the On owner through much so from a sort XXX,XXX churned not perspective. community? the biggest second to channel the subscribers, a

You insurance to pet behind, up stand want bring feel them and comfortable. endorse,

that that when they're with was they when explain. the hear and they do going you more of easy have plan on, to a something And simple One engaging the this to owners? transparent assets that brought about trepidation pet industry was initially

Margaret Tooth

initial where educate need That to honestly, the is we us, territory our felt that's great partners. a for really question. And

to have the speaking the vets. vets. They be know, a going It for these point veterinary did you are of as who people So conversation. continues pain this doors hospitals, in to are

that canceling of but their for opportunity -- like type Trupanion pet We're we the because cancel what cannot many fact to frankly, also not situation, imagine, We Trupanion. just firsthand that can of reinforce you experience an As to month-over-month. And explain can a there. coverage, it, situation clients through only going are pet. is feel leads what this a that in our

promise. is critical different in We in that that an I has are coverage our it's the lifetime that that would point why trust a those the type to seeing few of policy and value, our We're the say you And is indicator not last and different. vets our trust that our been in demonstrate we're our lead And What we're vets know very the on how been thing our pushing hard happening traffic on higher of conversations to adhering vets based of than sign. of perspective, from conversion and both to transparency the it. pricing too good we're as before. It critical it's funnel we're that's weeks, ever veterinary the yet, wording industry. get terms to to the retain made, see trust also shows this able they and as but

Operator

comes question Katie Research. from next Autonomous Our from Sakys

Katie Sakys

trailing I us? wanted quickly which would Margi, the discussion extent the quantify X-month on to basis be back on a for circle to retention willing retention. really to for you improved

Margaret Tooth

for our line on big of of detail. down is we're our pretty today, It's our expectations. doubling of improve our other very But XX% that the happy moving much of very symptomatic is cohort. We the level haven't now products, core really us and nicely, performance. with members. I shared it's from Because But it's which that over focusing with expansion of on that in and we've it ahead think business, seen perspective

Katie Sakys

ARPU of to quickly. Can back impressively almost really second the year give increases? would the adjacent rate beginning increases row you now. at percentage if the for what and any to so, guys is XX% there in expect XXXX? remaining quarter that, that of color face to the as half experiences book in a large of that perhaps in the on XX% book, the the where It's you those held those then of rate And over any trend Shifting portion

Fawwad Qureshi

context give can some on half. the I just Yes, second

Our year first contributor going to was pet that to was we expectation than as a towards ARPU what more spend. a line half. is a acquisition that so growth QX, on We kind saw we've This balanced, back ARPU count in little was pulling it top subscription saw given bit in lean from similar to be driven been more by of that perspective. where a but

in in is second prior We the the ARPU expect similar first half be have of flat half that through benefit sequentially margin and our you to that lot relatively of of where pricing saw as by A second being half. going categories. expansion highest we years in what driven the flows expansion in then to that

in more that, are benefit that's going again to increasing hit gradually an year. from target the are we investment mentioned, increasing an margins Margi that want us We That's our be acquisition We're As to now the standpoint. of half going to first investment to range. in ground next acquisition. closer running

say So is ARPU. second largely driven be still the half I would going to by

Margaret Tooth

will in have increase members for increases we XX% of And received us, inflation book QX. our to in business large the in get by facing the an end we above in time terms the year, this then see the increase XXXX, the of of unless just biggest

good have will back the periods, affected the next had prior need of focus on have like level to sufficient we level, to that see pretty moving and above look over we've have a stage at retention stable a XX% QX, inflation we're increase then group that in XX move business will to the pricing sub-XX% shouldn't we months. book of so see time again flowing go forward Obviously, more on next move feel the inflation. the But up, do that's able rates that dependent our again. really we up set to members delta being year. will the If we today about our by we from Now pricing that we book. And feel that we through that hold that entire fact to our get we the

Operator

next question Burdis Our comes Raymond from James. from Wilma

Wilma Jackson Burdis

lower-than-normal industry visits vet 'XX. articles XQ discussing some see in We

you saw types Just the quarter. if trends any those in of curious of

Margaret Tooth

than with an member otherwise. frequently suggest It We've to go It industry. met our Typically, what client. trends entry. So care. uninsured do we've volume removes data actually more we the vet Trupanion and what definitely barriers barriers the is to in they that the always to removes find [indiscernible] found

of hearing their So lot what's X been to years is without a puppies in in One, ago. hearing levels markets And without waiting, at to pet the territory see veterinarian play things been in partners happening and with they from were here. a the will couple when from that fact go the same people being there pausing. We've industry down leaning as the and not purchased what we're are our they an issue are to general. kittens and the

business So there's the driving coming clients which that of There's to less is hospital, down. new less part pattern new visits.

they proportion veterinarians cost, are going higher realize made leaning earlier, we're actually And point that's the to more are they're members. what anecdotally, is our parent pet that to and we're I when they're how into before people again, about to obviously the finances see pet But from view, of more clients concerned speaking ideal waiting of they're the them does Trupanion their not about they veterinarian, take waiting. which have a their are to hearing fact their is, thinking seeing other the to to do. that in and coming The for point

that recognizing the them value that. more generate helping as of to lead offer a volume they're result to and so And we

members we it's person initially, patterns have, the our slightly different. So that are you but think and the counterintuitive that's when about type attract of why we

just July a I of slight in add, are visits. We would seeing, terms in downturn

assumptions happens wait are there. so our we'll and remaining see But So what XX%. far, at

Wilma Jackson Burdis

Okay. you the is by? other could was us from about raised you there million then bridge by subscription? that $X it's piece if And driven Could coming help talk Or it line just impact? or that. other Just what the business in Was quarter. in just EBITDA you some where

Fawwad Qureshi

businesses the primarily driven by other small. is on subscription profitability The relatively margin Our is overwhelmingly.

driven. largely So AOI the contributors are

as AOI So enroll the of pets. we're to talked more continuing as flow-through ARPU well a generating result that about as the we

on good overall second with it, exiting think So bodes first the in half momentum first and within some expectations. When about half, us of half. second largely about some the well for we about good optimism feel the we terms versus line plan again, feel with that our having half

Operator

Thank There are queue. presentation. concludes our session. no more This question-and-answer questions attending in for today's you the

may You now disconnect.

Trupanion (TRUP) 8 Aug 242024 Q2 Earnings call transcript