Trupanion (TRUP) 15 Feb 232022 Q4 Earnings call transcript

Greetings and welcome to the Trupanion Fourth Quarter and Full Year 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Bainbridge, Investor Relations. Thank you.

You may begin.

to conference quarter call. welcome XXXX full and results financial afternoon Trupanion’s and fourth year Good Chief Participating Chief Tooth, Wolff, Executive today’s Officer; Officer. on call Margi President; are and Darryl Rawlings, Financial Drew

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

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

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

I With over that, to the hand will call Darryl.

Revenue veterinary these Laura. that ended $XXX business income, will of We the for and a XX% in of year for marking year under pets. the X.X continuing to our enrolled inflation results pet Thanks, of large over recurring benefits the outpace million grew with million, demonstrate owners’ a market. to growth. grow. monthly our medicine consistency model year-over-year disposable of total continue year The another strong products With penetrated need the to

adjusted Total to $XX XX% grew income operating million. year-over-year

internal was estimated the operating subscription make predicted. expansion basis million as year-over-year of an In it of margin sums of down faster high funds, deployed points in deploy As of $XX return. veterinary and of adjusted to rates of operating our return adjusted cost XX%. these acquiring rate pets greater a for will percent we care Long-term, XXXX, income capital of easier our initially grew revenue, us XXX we than and

In on the $XX in two doing that We access gained our of acquisitions Continental to hospitals we million addressable approximately veterinary us also invested Europe. number doubled nearly so, market.

so. against In distribution the balance commentary Margi additional and on XXXX, significant our new to including momentarily. continued provide low to growth channels North our our initiatives. support capital infrastructure our will in medium investments plan and work Further, we coverage sheet to funds America these progress on new to the added working provided access and brands, two us XX-month in do

behind spend market in are very have days, of are with early pleased to initiatives upfront these these the us. we Although majority

As before, understand we revenue. take well expect we monthly with will we to recurring said momentum. is build have characteristic a years it This

segment by other and Our grew operating adjusted revenue business XX% low $XX income year-over-year margin million. was approximately

As of reserves reserve growth. these million, over this than operating in requirements support form a totaled business approximately capital are this to In time period. we earned aggregate, required in the to is hold same reminder, for cash $XX income have the our which adjusted more capital we segment

now working In return. to ability limiting agreement, higher large With effect, more of our partner this our our minimum with to capital our have Through other policyholders period. long-term business Trupanion in our with will rates stay we for our effectively agreement utilize a capital segment been and at has towards deploy existing a new other for X-year business. our business subscription mind, been

business be to more early that expect be underwriter new QX. pets Any by moving majority forward of underwrite as a as will a we reasonable different issued We the margin. at new

XXXX, of prioritizing capital in will areas highest Looking our In be business deployment for that leverage America drivers our balance value further our to continuing be will as veterinary strengthening creation. ahead, focus the sheet we on returns. our and deliver us leads main North entire in our

will over With the call that, I hand to Margi.

pets and Thank rate of was return XX% XX-month trailing everyone. that an I’ll afternoon Darryl’s echo a sentiment strong on deployed estimated Trupanion. million growth internal acquire nearly for it to a good you, $XX at We of basis. XXX,XXX year Darryl

Continental in pets quarter approximately two the Europe. through additional acquisitions in We XX,XXX also added fourth

these momentarily. channel benefited while months to this maintaining us rate delivered significantly pets retention. new improvement Excluding average. Drew pet believe conversion the than We our industry’s for pet strong led we modest from growth our in robust and by member business higher Trupanion be on will on levels a growth year-over-year. provide veterinary commentary overall on book in the of products, new average XX% approximately XX of with the which XXXX leads Absent of stay

returns we adoption a and good the checkout. use at uptick up the member invoices the partners and in high was saw we enables our software from and across of software more directly in prevalent XXXX solution second pressures to rising pay channel. ever, as hold X,XXX This especially field environment deployment of year over of veterinary the engagement the making half Positively, and insurance the With North took quality in territory than notable our in America. This with XX% from the to cost consistently in our approximately back is the rate veterinary that time medical relevant saw highest XXXX inflationary us prior of hospitals the ended we hospital yet. the year, also

In We relationships be were Our ahead. together territory for again year in-person the to veterinarians is X staff hosted we and and our conference setup territory to in thrilled partners wins in-person years. and first a their around moat their business. November, our celebrate with core execution partner

to am half of internal our would estimated discipline XX% been the As in a spend about to team are by reminder, back the the we make estimated PAC the show happy is pressure in quarter the is all of X% have return the inclusive benefits spend a the and fourth with the with the come. face in much for our of PAC of higher. light trade-off IRR XXXX. Absent cost This spend, associated anticipated reflects we I our particularly the rate margin conference. encouraged still of with quarter,

of we even further IRRs this our will drive lean to as in higher into guardrails. to ‘XX We discipline end look the

this the last in medicine. to book in also impact XX% actions exiting increases to pricing two pricing get flowing changes we key the of X% have our of we Since Absent continue additional have states. now including we we are seeing veterinary increase approvals through ahead X% in We spoke, approved, planned. another mix, take quarter changes of imminently the total an with

year. to back pricing we through average a The continue be year. period. January, pricing As March and is diligently a our it the increase expect target of changes build December, margin our XX.X%. February, it to immediately are but to to to by XX.X%. new to was reminder, This X.X%. flow book will team existing XX% was In In applied this over get XX-month pets, our working end In XX.X% the

efforts get effect, on of With pricing anticipated focusing member metric. on ahead the pressure retention to are taking this actions our we

yet Nevertheless, to expect the we through rate material offset have resulting these than from any come rate but given changes to. increases roll-on, revenue. more fully these any impact see ARPU We should impact to the adjustments them should XX-month

the their In support able on this increases More importantly, to of our keep will value it’s pricing to will to remain pets. ensure us owners years hold pet. of only ahead, promise as in possible. for that will us care enable the the Ultimately, their steadfast continued of focus life help grow our promise budget to our mission our We for XX%. pricing members as we are and will our product need mission pets for many pet and

over And having it’s those the a we Trupanion other veterinary behind out quickly XXXX, the Trupanion? have reached remains the brand, speaking main are milestone and surpassed commentary have solving. would thus How the provider of the of of primary as testament focus no The pets such many our as support, far, problem to survived without not days engine milestone reportable $X billion of final my This performance. we invoices. in of has in we is a paid

by progress our PHI Aflac including As Chewy initiatives, we a Furkin with efforts. international end-market other Direct our Darryl building products, and mentioned, on products against of in and lower made our powered cost are also XXXX, plan and advancing XX-month suite launching

today, of initiatives new In our represented these new our Collectively pets. X% are XXXX, products America in small. just North

of these for With development, we attention these our turn optimizing moving growth. revenue to initiatives streams out now

that in expanded disciplined IRR well XXXX, and be we foothold in We In step addressable Continental acquiring allows market our within up will approach, to rolling growth way significantly in Europe. out a guardrails. us a our into our operating

of estimate XX,XXX to doubled addition veterinary the reach our With hospitals. over we to Europe, be

its on our modest. revenue, from acquisitions relatively the nature Based of is European contribution

was licensing talent, will currently operate selling these importantly, these organizations, through marketing businesses these from products approximately the revenue and like that in As In quarter, relationships a peppered acquisitions ease cum drive another But more reminder, are two the two underwriter. technology, of regions. that acquisitions $XXX,XXX. insurance entry

announced working with addressable in on hard and a a will add market. joint veterinary venture to our hospitals are our approximately addition, In Aflac Japan further go-to-market in This November, plan. we XX,XXX

our Europe year. into reminder, Japan a bring is Trupanion-like to product goal a and As this

substantial initiatives. strides we made our many in the XX XX-month across of rearview of strategic With first mirror, months plan our have the

the Some areas of especially a allocation, a solid I do, than record we for but strength that delivering to pets. we with disciplined commitment the expect the faced to inflationary from still of and industry further will demonstrated emerge have in recent are pressures. we for work competitive so strong growth. having sustainable others, promise We position Throughout highest foundation solidified environment, a when proposition and as pricing today’s have this, have the track along do we from both built our vets capital but value inflationary

over With that, the Drew. call hand I to will

Margi and everyone. Thanks, good afternoon,

many highlights, for and fourth of as discuss our financial my Darryl XXXX. our focus quarter first covered and year on I will commentary As well full XXXX Margi outlook as quarter our performance, the

$XXX XX% was Total led in up was XX% year-over-year our up business, revenue pet revenue Within in million, the year-over-year. subscription strong addition our enrollment in growth business. for and other subscription segment, the $XXX.X in million quarter, quarter by our business to

pets up This pets currency business our or typical to year-over-year includes have in increased XX% U.S. fourth XX. a European were million December quarter. $XXX.X exchange from been subscription would constant added year-over-year Our a acquisitions. that subscription pets a the over in rate. revenue result as as basis, larger than new experienced of year-over-year enrolled to Total approximately the impact XX,XXX XXX,XXX quarter of the On Canadian XX%

increased per basis, on equating an is year prior pet Excluding in prior of XX% year was revenue from On XX.XX% compared the products, the of of to all Monthly invoices average calculated months. X.X% life pets to to constant that XX subscription is average on trailing was our period. the XX.XX% XX-month up same increased acquisitions, pet retention time compared veterinary which our period, cost a pets total new monthly Across basis, the enrolled X.X% $XX.XX, same which per period. over a average year-over-year basis. currency

business, As we ARPU included quarters, ARPU by continue have noted our and a in impacted cost in mix growth of of accelerated lower change areas. invoices to be previous veterinary in

XXX as Combined, down subscription period. fixed our expenses Our the QX. basis percent from a claims as prior offset revenue points revenue points which prior were to team business in subscription X.X% elevated revenue ratio in quarter, reflects the X.X%, compared XX seasonally our XX.X% also of to down of to to of This in subscription basis the lower down a loss loss the is quarter Fixed year-over-year X.X% ratio. continue declined a period. efficiencies expenses year the percentage in variable and from period. throughout drive expenses year Variable was X.X% as were

adjusted As year a X% increase this over have would $XX.X period. or million, result, constant an a operating of On operating was an been X% $XX.X adjusted the subscription income basis, of of increase income currency million. prior

quarter, sequentially quarter. from XX.X%, For prior up the adjusted our margin the in was operating XX.X%

XXXX underwriter than turn our led approximate increase mind business. to I the in in other We business comprised million, segment, additional We of currently by other and But services briefly our other Now business. XXXX. in business subscription was in is revenue for XX% XX% that timing BXB our growth revenue Total different may which new generally and of year from shift. in book a to slow will products this an to margin their segment profiles expect have in of period, business other pets. prior component growth $XX.X anticipate transitions partner to keep an growth new our that as segment over

calculated XX-month added pet subscription internal resulted acquisitions. segment million the to trailing We $X.X of adjusted from excluding in for or XX,XXX those of basis. XX% a to Adjusted cost was pet the and average prior for approximately of year an in up single pets, return operating $XXX XX% a other over new XX% year-over-year period acquisition more total, was rate our In million. estimated as million a income operating income $XX.X $XX.X invested acquire business on quarter. This

also an on $X.X million XXXX $X.X additional in quarter We or invested million year full costs. the the of for development

significant setting including the As our Margi new expansion, distribution channels. and long-term well as was for efforts, noted XXXX foundation products year earlier, as international

for $X.X expenses development our and year into in Depreciation $X.X some Adjusted these Total million within compensation variable amortization was will quarter. of or was as to subscription million of into the business. $X.X the Moving million prior EBITDA out quarter, shift fixed first compared share of the for quarter. stock-based $X of quarter basic a of million diluted with loss or per million in was loss and million prior the our basic in $X.X $X.XX compared was year the loss or Net share to per line $X.X net loss $X.XX expectations. period. a diluted a

debt million $XXX long-term million million $XX approximately sheet. balance and platform. million $XX.X the credit flow the positive facility. was for XXXX. cash ended to We with with in operating totaled from largely investments. year a in We cash XXXX, $XX $X.X compared negative our Turning XXXX, our policy $X in full investments million available Shifting in year to in over reflecting hold our million expenditures flow, a $XX.X next-generation under administration step-up million Capital to in year cash a

of As investments With to flow million. and market. previous our invest strategic XXXX. a our much guardrails $XXX and place, result, we $XX.X in our able free flow positive in to free million year cash operate increasing of was the in approximate addressable cash the generation investment foundational now Aflac, negative in intend prioritize we’ve been flow Since from outside XXXX cash

mind, to Canadian in our outlook. the projections in to rate this fluctuations, currencies. our turn Keep most subject mind With that and revenue notably conversion are U.S. between I’ll

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

X% foreign first expect XXXX. We will amount to particularly to in year-over-year this X% of half the headwind, exchange

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

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

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

within XX% As operating pricing we flow Of take as Margi book. before hold. pricing margin adjusted this, a operating actions our noted, our our in in to year-end it subscription by through adjusted will our see to business. towards $XX track our invest needed. spend opportunities step back we’d of take are monitor million team’s to expected intend income, or adjusted Development expect in $X subscription million of in the PAC around QX environment target sequentially market back the time to to million operating and record We strong pets up to market building margin broad expect Because acquiring down relation as in leverage our $XX be approximately to closely expenses adjusting XXXX.

million million to range is XX% the year-over-year to million the $XXX million. at As range to the expected quarter, $XXX This the first be of revenue adjusted revenue $XXX is expected $XX Subscription to income of is range growth in $XXX midpoint. to in $XX to total Total is for be million. in expected operating the million. be of

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

a Q&A-focused June that two at our marquee plan is I This in I joined the investor for hosting will X, will your opportunity once-a-year and May be the moment approaching Drew. want team X, XX-month once our our Q&A initiatives Margi Thanks, by On Meeting. Omaha. we to Shareholder events to annual for responsible our executing year. in to you remind again be hear a leaders take we’re headquarters Annual quickly format. for directly in of On in the event our Seattle our from

be we can understand for In events many see looking encourage Additional found Relations publishing XXXX we of it. to you annual those my for letter details on weeks, for be and next read how few website. also better I Investor there. our business you think. We both shareholder the our to hope will to

With that, questions. we call will for the open Operator? up

question first with comes Please question. Our proceed Instructions] from with your James. Thank Elliot Raymond you. [Operator Wilbur

Are Elli. Hello, there? you

me? Yes. Can hear you

now. Elliot. Thanks, can We

thanks. Okay,

calling national out you whether reallocation territory for just partners or guess you resources? in calling territory terms of for your of or in Margi, expect could be meeting, terms that of hospitals and wondering not XXXX just number on patterns, you partners territory question to general the sales I that given of talk changes in First if came meaning plan any or about reshuffling targeted anticipate you

Hi, Elliot.

first this So both what years, have yes, that cause and year back the in also celebrate so territory together achieved to look in forward one to everyone having conference to the great is we partners real to it really was year. for X but prior, conference

we’re absolutely know our terms the field pattern, core of what in back been and development strategy, uptick of In on has a hospitals We’ve consistency really months last deepening in that back that a big things, the and and X since do of well. fixed install rates. we most we those doing in lead, relationships uptick in software of big led the March two

us, managers continue so and in working job path. on general territory the The the know for we’re by that general And and and we works, together great are partnership to that moat. are a that doing partners deepen managers continuing the the overseen same territories to

to what been always we’ve So doing. no difference

look in vet times vet XX,XXX we to given any get hospitals can several think activity. of to months I We forward XX solid year.

continue So we’re allows thing us discussions the group. into hospitals to right to one-on-one happy way when for need conversations, And has those will as done. that always get have working do. now, to and really back direct they the up, they It’s us we’ve same and that the it do casted we market to support us

the of exiting And levels? guess, I with the versus or weeks letter, just we I thinking numbers are we and a now shareholder engagement, but year frequency will where couple pre-pandemic Okay. the know in about call then see

Yes.

which shareholder was there be as few yes, on a in say, coming you bit a just detail more the out, So weeks. little letter, will

patterns, core prior overall bit are a we our actually little ahead we pandemic. – track of terms to of back the where on were In

now ever which more mark, people in crossed So is the have fantastic. before. than field We’ve we XXX the

that frequently conversations. said, means there to like kind we’re I frequent more So those, get able more of have out and

of the of we overall just hospitals number X,XXX, said that Just our hitting, in we’re hospitals over X,XXX of we’re terms software. in

have We on a XX,XXX regular hospitals over with been working basis.

X conversation continue you to dollars those that we about all as to that up really that as the can we’re sure occupied expect when build, think would And over through numbers I territories X see we X having. ramp say, they have to that’s ongoing to we I months. months, that next, think continue make education,

ask connection essentially it with I want sort mean guess clearly, Then to flow-through sounds with continued question trends inflation of looking discussed to last mean, months, Okay. the is terms annualized like well. in roughly I is some the over have in timing. maybe a But slightly what inflation But pricing couple you level on at different I consistent aggregate XQ results, increases of numbers the of of decline. in out as I consistent.

call do sort So what your versus I’m and wondering of to of you’re to planning relative what you’re increases? discussed book seeing rate terms in what in of business you last

Sure, that everything the we start of to When the more in yes, can this you through pricing and as went expected. context. But just as of we over roll changes going say some where mentioned as no with there towards who half we I’d back well Drew off last gradually, surprises are on they were, year, know. before, CR, is I as hand terms then can our provide into we

see I That kind would in and it the which another especially we as now, we expected rest is of end right there of points that don’t a gate. the call, And So any in be X out last sure is we the good, forecast attention a trying to grow after are to this get quarter, had of will make had particular we line with – ahead we increases. paying say year. and with by to we XX% see this, be through that in potential is enough room that slower about into roll what little of I is there we’re future bit to the will year. we seeing, of to mentioned is the what what as coming

sure at and I’m making really granular and regular we’re a and on looking very level closely frequency kind severity very our it of very basis. that watching We’re

here. good data. March. I got will where all being things once going. So in got are year, shape Typically, We’ve we’re in usually think good a on lens things raise equal, February, We’ve January, the good rate that

of But moment, through. if anything come feel action think the with those changes. book. to XX% the kind I add? at that seeing trends Drew, we’ve So through we poised take we’re happy would And now that what you both got

I I’d only just guess thing described. is that the add Margi dynamic that

And step rates they we through Our in one come changes tend to early linearly. where big see dynamic. prices vet pricing year, and the it’s take that in

And is margin, back so that’s the pricing why outlook that’s a we talked consistent in expected. QX that totally we that and in step as we take in the but line gave all that about, with

of Okay. last that you that inflation sequential or just guess, are question I’m policyholders the the And sort I seeing churn higher present about sort is of to presenting the letter, sort or canceling number driving to those potentially seeing XX% of of policyholders Thanks. the the impacting retain mean the effectively able just been on and you And option are plus in address very increases? rates. more recent levels, or business? related know more look that? you to just of levels necessarily considering decline. impacted has and more really the of of and another or and maybe not with what canceling discussed changed the the of Can rates, negatively policies level sure you’ve just but actual book we’re the the given you with I it modest actually exploring think of business just churn, again, I bucket in not in context increases being price monthly retention talk in fact terms annual Is increases

Yes.

for you I expected be we environment, when really, perspective. level, believe going would surprises. the – have months to It’s there’d is I industry a we from no XX probably at but let’s look as And slight we macro So your a decline, retention mean, seen the highest Xx context, average. say, point,

that So through different, that of we’re I at dramatically as high in those look coming volume the drop changes. not pipeline, hence we retention the all just at haven’t anyway. yet coming level not say a got pricing very would there. also But we’ve rolled overall it’s that slight we

So as keeping will pets industry are still we expect they expecting to impact as believe see the some as we we our a average. – hit come to long do That see twice the will to on, we that said, retention. And we there. next the to course the the a little XX months we increases over of of to see those bit of bulk be through, get seeing a X book roll as

from say Just what offset through it’s for we impact we pet. as terms the to would though, our living retention to numbers is. to the – an make and keep believe of those necessary actually up going can sure to overall, it’s sustainably value that for to can – do life try the prices and I the perspective the mean membership speak we anything we’re of increase, us sorry, Drew? of I Drew in ARPU in terms that that are putting from retention proposition,

the one price almost I’d had had look retention XX% as in members at data XX%. just in of XX we in back low point then, roughly increase good add, XXXX, is And we our back months a we XXs. greater got rate history, a than

and better point like. so got a then. retention point that it But at might look since of reference of we’ve what And – a gives you lot

are tactics to the to one as teams well thinking about I other that. add the of think

rebate we in or that invoices to the pricing what our As promise do members proposition. price price what we we’re to able of expenses to to shape coming XX% see as plus that committed stay true that, rates we come we to is, are are our that line is and have to we that in some bucket, into and event internally more trying value see through we’re through, with refer basically the that and of we our falling the members to in this ahead being form, again,

message, roll holding commitment not our retention anything that and to true that through. trying we we’re promise our members, as a we as prices made and to So is from change member these

the Operator, you take call? want you there? to Operator, next are

Sorry.

Please is next your Barnidge. John question proceed question. Our with from

Thank you very plans much. comment was reserve increased about prepared I regulators. term requirements state there Appreciate a the to a with in opportunity. draw. and I the remarks, question had loan the know around

draw on So you. curious that loan, Thank please? to about term and plans that

has have any it facility. credit It’s And a remind revolving feature. I’d we that on is long-term $XXX we million of draw do then That total becomes term what facility. Sure. is everybody a a million, credit X-year a loan. $XX line

we this as a – management kind our versus our lower cost fund So reserve internal of way debt to requirement And that’s equity. and view guardrails.

over on we continue to so draw time, And fund reserves. yes, that to will

Now we and that in reserve reached time, efficient fund really will our insurance we large significant the about towards that capital our business that’s with business. over agreement there. how usage to company do other our is allocate more reserves requirements. frees our partner a a yes, But we’ve And higher-margin subscription up inside upside as

a to about about please? from enrollment talk to someone begins is channel reissue product that worksite. channel. times question XQ for season you. dynamic a you And Can maybe and you’re about enrollment as open switches or open where effect, maybe I to introduced a There emerge a thinking for new Thank Thank vet-driven is begins that. take get as medical then and driven there Great. that a can lapse had for worksite you the how

sure. Yes,

I understand make Let the me just question. sure

one channel talking another. are about potential here Is we to cannibalization that fair? So of

had channel But it Cannibalization employer. yes, vet too that it has through might their someone might be now essentially, offered have the strong. through

you for Thank that. Yes.

terms we think of about quite use the new in just strong channels, the than you, I the word Definitely to you with when if is allowing vet reach of general, got pattern, with we we penetration agree penetration. with mean to I when cannibalization, a distribution really a rate, it’s in type So, typically products us have channel. X% and partnership will, Aflac the

we So, speaking that to. huge in terms the are we crossover a people don’t anticipate seeing of

to will able that vet because we known We same time directly our it’s through we the known are believe hitting channel, is at pay veterinarian necessarily and the using the person. not Aflac, be brand And checkout. brand that being of our for in

not, shopping. seeing of which believe or are products any the consumer specifically we designed concerned and about are at we the for overlap So, this the is point, purposes crossover, very

a they little So, looking we work in something if than long-term now, of enrollment worksites, hospital. They I become what very really, be looking can are but in can it’s to coming of really point be it are how think part this on we it of will are for distribution businesses. the the we handful more that site. to a for new watching our a a to through through going sure are doing, And related days just have And meaningful see But to share our in and capitalize benefit make we with kind nothing early channel at different obviously to we are that it. bit they strategy.

answers. the you much. very Thank Appreciate

Yes.

Please Jefferies. with comes from with proceed Corey Grady your question. question next Our

PetExpert question. might on but terms the I the Yes. QX? in taking my in you sub-count from what XXXX expecting contribution in acquisitions? the And remarks, in prepared from any acquisition have European this color then Thanks did are missed contribution you provide for of

two the Yes. XX,XXX We two came in we those that acquisitions. – with acquisitions, pets brought

we fully on again, in business. As not we underwritten remarks, marketing prepared It’s have that model mentioned the our are once they other the companies.

And so stream currently them marketing just is the commission. revenue from the

subscription businesses. of move is far PetExpert, the are basis. that’s and month revenue was so underwritten Now, which eventually full the to have our But And contribution fully a underwriting our will of on by their is why We that had business, – them largest one XXX,XXX. model, in direct-to-consumer intent two, is to relatively modest. and are a they they we

And so year. what But that’s of can be Trupanion and the bring back kind they we are off growing, you XXXX, intend to them this you like for contribution product base. grow if that would into to a

of impact, overall I expect of context add would from initiatives. the see around terms XX% of we our so to to our new XX% If coming pets can Yes. new all some in

gross but of coming earlier would our PAC XX% channels a count as about increase spend. the new year, when see of our increase to terms through in we pet comments, as So, to we the you adds, that referring XXXX. we both overall are at and our in think look count in same international what And distribution expect as Drew’s pet

you So, all to tells are different all hold general we disciplined We same our of to approach. with our for in of opportunity expansion able very our having across be countries that really involved success, are excited of we to managers kind international being are a the that guardrail. we the believe that allows us and great

where deploy agnostic the be we location, So, are will at of higher levels rates the capital of but of return. at that the same looking to they

wanted loan. question to That’s Thank term on John’s really And follow-up you. helpful. on I the

you talk further? enough higher you need you plans tap Just term to the about like or on fund can cash feel hand you capital And reserves, do reserves? have to loan the capital on

income, The we first not them. handle reserves, business need for other it’s me been where hand to to a in of our about lower have will at it has And capital increase million adjusted so Let clip, earned super healthy operating funds. then I off Drew. $XX a obviously, that changes growing area we about million in aggregate, hold and reserve us of this is The capital. it going to at announced, efficient – not $XX of have recently use our required

higher us you to capital an and to give total anything slows area opportunity rates there? that return. that As our with at want capital of will Drew, places lower same reinvest requirements add down,

which insurance No. I penalty book. penalized reserve mean entire that calcs our a there – growth our big in is

in grow. helpful linked there. efficient are we fast terms that’s our how totally use more And of capital so with And needs

expansion As that’s being should have margin more outlined, now, areas. capital posture. through deploying right in our but return allocating we our are as highest into at then we capital, get the going we to disciplined look year, year, will And we we the go

Thank you.

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

evening. Thanks. Good Yes.

guess Drew. for I question, First

in adjusted first the You invoice quarter gave contemplating operating that earnings subscription guidance. ratio? What are you

But but I then in and lower to XX% you see subscription think of up down – and step think so then the a a I towards margin. starting back back building will half in year in ratio, the operating building step back adjusted the a loss year. up,

operating very full guidance to more But our AOI. of lot XX% And margin. year consistent and there – go. XX% year a subscription a year-over-year with So, growth it’s that, is embedded to is subscription the in in revenue subscription

As we for margin coming growth. through more we if then deploy capital through, more see it, we will expansion go

I as to about goods, to see about to the think when up if of that well, can And I coming think XX% add we we expect cost overall that XX%.

through rate So, a of amount have XX% ARPU. we at the flowing is to XX% in the moment, between as reminder,

from ahead where in get from So, be back nicely curve us year us of a of we that the should put earning the in or terms last of catch-up that kind cost. to line slightly

I should flat it. book? How the was I the Got of a rate surprised following increase didn’t it? we that on ARPU that bit we guess into adjusted should that, like on a It guess interpret you ARPU basis. the up given more. bit looks little sort I little put interpret was How

Yes.

a and We been mix. about talking all it’s this have year, healthy dynamic

headline drives like-for-like about, from We the so lower rates. the Margi have rates to was that down mix, talking it it – that,

the average again, our ARPU October, what for also once growth ‘XX have are really an X% typically nothing X.X%. X%. about we changed are has updated back whole unless the to the don’t is X%. other in year-over-year rate we We outlook over with that than in first talk they see Well, consistent we That’s on have they the significant FX for assumptions. for But year, mix our year, headwinds year full part of

cost-plus are ARPU, we have lower have also to going also we through claims. If plays mind, Now mix lower bear are model. in we to claims a because

two and the So, focused why of are we together, margin. end the day, on at about go it’s those that’s –

year is margins our what’s to embedded And so in XX% guidance. full XX% on average

Got Drew, was it. that And then helpful. lastly, just

XXXX You experience. mentioned the

give? that think number that gave to at of you I of said book XX-month How number that of in low-XXs. but monthly that kind about XX% terms you the we was like reconciling should us a it think retention retention you rate, XX%

will that so, answer Darryl, in – Yes, I my shareholder It’s it’s it. letter.

a monthly XXXX XX.X% rate So, our XX% retention are we pets of about at And looking XX months. referencing that you that’s about saw new rate. where back at to about equals

people a go to and So, back time at it. placement take it’s just for a look

before. there have We been

been have through would it, some and we expect We similar.

Thanks so much.

your proceed Please from comes question with next Our question. Jon with Block Stifel.

afternoon. Good guys. Thanks

a anything strategy, the And was have revenue been that my in those but for guess regulations First why to other free changing, words, question, Darryl, there California. regs changed changing or it was in maybe thought up you, response capital? the is just might also, I were had in change I are some now

maybe that, So, on you can elaborate please?

up started conversations X it years and these capital. ago, think I No, Yes. was free over to

cash time and in the were from might to smooth I ago, we little to allowed planning. partner had long-term got a of would if solution couple have million didn’t of able think a happen, a us COVID a a it we have bit with have so, kind probably was beneficial little Aflac that the If spend $XXX occurred but the moved it infusion quicker, years bit quicker. to our them up to come transition, not with

work push to California a of didn’t to revenue just It seems that. you XX%. of you this in on But like Part bit, reasoning X% down business across took the change Okay. play regs just leverage little from was this? did you California. get to in expenses a came thought in role wasn’t in I X%, to – fixed That regs I which changing that to seem out. didn’t

reg it to to any agreement California. It changes all No. come in papered. while us get before just took in had We a this

drive changes this California reg not the So, decision. in did

same XXX,XXX. a of prior And Drew, always ARPU. on you, struggle offline. with Okay. sentiments to I base then, the it’s for guess my question I just an

is take P&L? just after guessing in there ARPU play, February pets, component through off call the this to get that’s ARPU we still in some realized XX,XXX about is where on and versus also think you added dilutive. we come am increases that a to churning will into we You through. mixed roll forward, ‘XX that it be I looking higher dynamic how went ARPU up think But the maybe do But do big ‘XX the of X%, see it’s March the start in I suppression. we know XXXX up X%. must pets

looking Yes. claims. full Geography mix. year hand-in-hand which No, of the are is driver goes at biggest for to driven the with by of then And is that, X.X%. we that X%

to parts so is and line. to the not And the value is portfolio business our pricing below, but above new the are new proposition parts, and we top that’s, business just

It ongoing that strong gives we by driving what’s is this positive continue – so us driven which mix. have And that’s dynamic. growth, this to growth. It’s

Thanks last have I it take guys. I will two offline. Okay. questions,

you. Thank

with Instructions] Our Shweta from Please question. your proceed next Khajuria question with Evercore. [Operator comes

thinking year, I Hi. line? guess maybe is to should further, the can not conceptually kind progression I of mean of Thanks. could of kind I ARPU drive but mix point Shweta. Jian out, beyond do progression? to This continue on that expect ARPU, talk this balance the to ARPU you if think this you long-term for down? this belabor how Like, there Is this we guess on anything that about more about

ARPU. are The certain an we Mix in has dynamic. areas interesting successful lower more Yes. is

we the about the rate in decade penetration one into example, are States. United For

in We two have Canada for decades. been

the Our in we than more Canada is the in in than grow, faster have The States. Canada of United is cost The market, it growth recommend the growth in veterinary us. in rate is States. our faster United long rate care we been veterinarians lower the

those dollar, lower-cost coverage. higher got a layer have Canadian When that in every we a time channels top distribution growing products you and you lower into effect, has channels. new But lot that’s have and U.S. the U.S. are distribution lowers currency faster growing to dollar mix. that take So, we added factor. another All been than now now percentage on Canada versus of the our exchange

before added We the into care have Both in Europe. two going Europe and also into – cost is get the have And of veterinary them we of new cost products. lower that’s lower. lines of coverage, average

and of we the cost cost and year, to in is That – also of spend. our the get model, a once It So, Margi pet changing, make for looking that understand to guidance value XX% but lifetime you of spending we our earlier, as so at job mix are pet amount on each sure shows around basically we those return. is Drew’s again, of we implied appropriately. appropriately is to strong those acquisition are streams to plus dollars. PAC the the PAC same rates be is the growing PAC year-over-year, are of mentioned that discipline

spend our for Lots But the forecast, modeling. increase underlying X% about So, ARPU, our equal. as Drew hard looking in PAC said, although I know are is for getting it’s also we at in now currently be multiple as to the distribution of business. can our nature of year levels clients lots existing of XX% XX% it’s of the but categories goes pet, of channels and on, products.

So, helps. hopefully that

this just new if it. one the for Very distribution helpful. other And I may, question, Got channels Yes. on year.

the of that channels. kind you Margi, channels like guess you what’s the expect size more respond if said to if XX% And the rank just And Trupanion, do expect Does Chewy, significant I which just is am of thinking that the I – you from base for linearity order kind these to just do the could the which of channel new of be contribution to that. that, XX% given also, be of you think Chewy significant? include can on – quite partnership? especially but you I

can. I course of No, Yes.

expect those So, to you are channels all see somewhere right. new I XX% between do for and of say combined. XX% we

European Chewy, would Aflac be the those plan, so acquisitions, inclusive price of all second. and that So,

same of terms are the them, of within are all the contribution, the guardrail. we at profile for margin looking operating same when In we

for are that I generate is instances how we and the expectation it’s got have learning some have them totally agnostic in So, all all say in retention. got to about of it leads opportunities. is we get huge us, better conversion others, to of and would

get would felt we years within were, a of to of $XXX that to million XX-month X plan in going of starting. we our something All mentioned of that we back couple able them now, are revenue years worth as be things

this putting in metal making of other. really a to we year we pedal and the the the start But to sure wouldn’t are to above rank revenue. getting position for generate out kind the and gate I think that’s of still of absolutely us, to are one kind kind of that want And true. I

see share of XX% color I contribute go quite that start think to to XX%. part the they can have which position a little But through to the ones go we we PAC. revenue good actually expect as couple are on forward plan. we of are over more all And will leading which overall, year, the meaningfully to years, the next bit is to to in and

time the Great. Thanks for guys.

Yes. Thank you.

the reached of today’s end session. question-and-answer our And have concludes We teleconference. this

your disconnect this You time. participation. may your you at for Thank lines