Trupanion (TRUP) 3 Aug 232023 Q2 Earnings call transcript

Good day. And welcome to the Trupanion Second Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Laura Bainbridge with Investor Relations. Please go ahead.

to quarter welcome conference financial and call. afternoon, Trupanion's XXXX second results Good call Chief Officer. Darryl Tooth, on are Participating today's Rawlings, Wei Interim President; Li, Executive Chief Financial and Margi Officer;

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

to internal references adjusted and contains fixed including free adjusted management flow. expenses, measures acquisition limitation, financial the return, company's presentation Today's performance, uses to without income, operating expenses, rate variable that of costs, evaluate non-GAAP cash EBITDA,

performance for excludes addition financial prepared and the expense. noted, non-GAAP in operating These otherwise basis, When of to accordance margin Unless before or income non-GAAP depreciation GAAP. or with we acquisition to margin, development which substitute measures a the our a term expense. non-GAAP operating stock-based income expenses compensation refer new use in on and and expense adjusted it to will U.S. is presented intended and margins pet be not are measures

on directly review to or which GAAP results, today's Investor most the Quarterly be comparable these non-GAAP Relations encouraged tab. the Earnings press under are found reconciliations release in Trupanion's website measures can these to financial of Investors

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

over that, hand call the With I'll to Darryl.

Laura. Thanks,

we available touch of our encourage video watch ago, meeting priorities. website. the were annual Among our highlights and key highlights Relations months our Investor hosted shared you shareholder Two a on on to meeting. highlights few the annual today three I'll

expansion of First, cash operating free deploying QX third, flow of to second, our XXXX. positive by adjusted efficiently, capital margin, returning and

an margins In was QX, expand. operating elaborate progress stabilize, signs early we saw compression, Adjusted period encouraged extended to I'm see I'll After in margin each of these $XX.X of income areas. but now. in of million quarter. sequentially these the only on not

to Assuming it continue the did with hold. of actions in we year the expect second consistent as margin the our as inflation expectations pricing veterinary our further expansion QX, of remains in half rate take

to $XX acquisition In result. is to the ability pets XX,XXX over team's in acquire in the this I'm less gross year-over-year, quarter, deployed add a more deploying we X% new with while opinion, strong pets. million my spend, thrilled XX%

I'll prior the acquire one basis, will cost value in XX% continue we lifetime refine to than relation acquisition granular pet honed pet pet per a a to to of period. year was point extremely On lower the and team on skill Managing at the a spend this momentarily. levels. is elaborate

a cash efficiencies early quarter. flow in $X.X our spend combination the million in pet The in expansion acquisition free sequential and margin drive of improvement helped

positive free cash to taken goal flow of spend in actions in towards expected are further Additional the reduce achieving QX. us advance to our quarter

our closely in our aligned once results, the months. more Overall, the is I'm encouraged the by are again team has This expectations. progress with made four progress over past which evident

the diligently through have a but on focused is We do, environment. team more to dynamic executing work

rates and of income operating adjusted grow to high remains internal goal return. increasing at our Long-term, deploy amounts

accurately As this those to which our compression, markets are period near-term geographies and margin more proposition. we throttling in to through on we and back manage capital allocating price we're of value spend

towards This flow decentralized the approach delivered goals. strong and progress furthering our our quarter, cash free expansion margin growth pet new in while

the our We capital channels P&Ls, of grows from the deliver maintain geographies allocating granular business will approach one many highest as and products, too rates return. that to

Understanding and critical lifetime will these believe relation managing will over so. spend to be our in how doing their us perform in pets we with

dramatically pet based of discussed pet. and value individual have characteristics will and we the frequently, corresponding that a on As lifetime can the vary

That's products and like Furkin Direct. before introducing coverage, of levels varying PHI

like Our suite of Continental offerings with Aflac and markets Europe. new Chewy and

goal mix of our new Historically, business internal book our every more for on evolves, in granular a the rate on mix based our of pet our was return As assumed calculation to pets existing similarly is to behave an report business. new of of average, our way.

it example, geography profile book. channel to margin and ARPU the regardless and retention For the same assumed of our existing product, pets and had equal with

way single conservative appropriately talk it. business, an was mostly line Now appropriate for a many this years to about as and

not this channels With portion a in year's shareholder this relevant. business, concept geographies detail become in of these and greater This new products, new less for new a is have Recall, us. more assumptions becoming meaningful letter. I discuss

I simple reported, further of ARPU previously Continental to on as our book were approximately return consolidated estimated spend we total overstated. to Europe, would be these a the $XX. average shared use we new an is that $XX European where pets our approximately compared If acquire of example pet at to

we to book. be would our newer the with products. existing our to case equal were two retention If assume This

Our have months of with coverage months. Trupanion to believe products less similar XX over retention is XX to retention average what compared we newer the approximately industry

say me less lower before, coverage drives retention. heard you've As

into Margi intend geographies forward, of and increasing momentarily. the those we returns detail products, various to expected channels With mind, levels our moving underlying behind in will of more provide assumptions some this and provide granularity returns.

to forward. signs Stepping made believe months and performance past see starting well back, margin improved changes we've proving We're out up expansion. I set the several deliver are over the of us to moving

goal prudently in positive cash flow towards capital QX. making our free of investing are We and our progress we're

growth Most management decentralized We're scale delivering our predictable seeing approach were our and hold through is and in taking our team our new efforts initiatives international importantly, stronger and addressable with more results. the meaningfully expanding good market.

that, to Margi? our additional plan. With to hand of execution around Margi our context performance XX-month add quarterly I'll it over and

everyone. Darryl. Thanks, afternoon, Good

I growth remained am balance preserving quarter progress This yet enabled the ongoing allocation, delivery into efficient share another pleased weeks to sheet. shareholder the most our made the during that in our been The annual quarter. eight strategy has while of of meaningful and channels has leaning capital just meeting deliberate our team solid since ago. disciplined

particularly the our intentional reduction when quarter. was which value. began aligning acquisition We considering added strongest of and strong growth over we XX,XXX to pet down gross the X% the spend is lifetime ensure our in In new pets to acquisition the reducing are we in investment areas adjusting places quarter, This investment, with year-over-year.

to consistent and geographies, we're members In our provide to promise. our able pricing value with where brand

Our estimated of return internal was rate XX% quarter. the in

IRR estimated a to newly adjusted predict our retention the As from cash acquired key this and ARPU use flows reminder, calculation. operating pets. future inputs are we into margin

was inflationary In reduced XX%, is QX, XX-month temporarily which on pressures. given current trailing margin

signs hear, soon of and continue and actions progress you into As early beginning we've pricing see this to to are will expect trend on next. year we margin our expansion, a made

from of pet believe forward, more will and that line ARPU, reflect more Moving adjustment to margin a new aligned contribution and an appropriately be our the and retention each to we'll decentralized contemplating IRR we approach. business conservatively calculation

updated providing talked capital shareholder this at also about meeting. more QX to release. most we be our our this approach shareholder We'll Recall, granular earnings our metric recent in allocation letter and in

acquisition is in will book Overall, we view pet the use continue strong view forward, the assessing business And when on returns moving our our climate. current of new multi-angle to performance. we

deepest of to our centric we from benefit quarter, the approach. mode our For continue

In solid Trupanion is ever today's more around before. up continue Veterinary of levels to inflationary and backdrop, are clearly conversion. the resonating see than year-over-year we leads conversation

penetration to is Ultimately, this are continue to instead able best market, we financial day conversations that the practice forward As look the look we we and medicine ending to that are studied to partners veterinary euthanasia. and for. of trained the from up forward very our economic freed increase

in months. an average with with quarter, this the retention focus staying the on XX members us our throughout With we mind, estimated maintained Trupanion

Given it's the our level of members, to of through reflection believe now today's rate with we a this retention. pleased We consistently are flowing increase strong environment. in execution in

in efforts. additional our me QX QX, to states. our flowing pricing By rate average month, and adjustments our pricing rate touch through expect across in book. rate North In have book securing on flowing we XX.X%. let of through the pricing this was the XX.X% XX us Now, refinement continued with The over end America

should book and end to increase as will be immediately rate by to rate this and expect of through September, XX.X% end hold a this to mind By in of roll we renew. year-end. the through the policies new Keep currently to October XX.X%, the members applied

renewing see are paying, this rate average these to in these increase. policies. what which is last for members example, relative increase an policies means was we'll As currently set a October October, This XX.X%

detail operating overall to meeting, our ensure the shareholder constantly more in in costs annual across are shared As the we monitoring true. assumptions industry remain

care Should this report months. take consistent quarter quarter in our actions with to in line to that additional assumptions. cost first be the of the change, as will pleased and growth remain in needed in We're second with poised we coming

target points during proposition of over sequential the quarter. the At to of it's value result goal all is proposition of improvement a toward our As increased XX%. to basis value target our rate return times, our flow XX

this we have encouraged by towards progress do still critical So the am I team's target metric. to while there, some work

our in in to path year-over-year next quarter. we operating point target assumptions, sequential margin towards also with of basis our the operating our of XX% improvement end With cost subscription saw year. in increasing margin currently care XX a We see adjusted to a continue operating adjusted line XX% the

continue contribution our the channels solid engine and we collectively. to our While performance, Trupanion products see newer remains primary behind from

we're the of their ramping parents. In a to efficiency gains. introduce With these to expanded comprehensive line product making Chewy insurance solid proactive market, and campaign our millions pet marketing QX, products

to lead channel we've Following pleased this activity, been of this see growth accelerate.

known European continue contribution which for high. new our totals hospitals from we launching pets shortly be is during adding approximately an In addition, our product, broad Continental increasing we'll quarter and Trupanion over its remains added the market, Demand in addressable to coverage for centric vet to X,XXX We in which very XX,XXX. endeavors. Europe additional and approach light see X,XXX Poland,

excited bring expansion investment, in market to our We're are year-end. channel to Trupanion of by a upfront market Continental handful and Europe plan. of to more of initiatives meaningfully of a many product After Product, new our countries are growth. and beginning period end contribute tenants key international our to a XX-month

gross XX,XXX or our plan XX% pet our new In approximately of XX-month adds from about new the initiatives. quarter, came

changed. live not times, We our times spend within the our all reducing At throttling has with appetite in sustainable market to balance mean is Our with yet, products grow maintain this to all the for growth we appetite thing our or this may approach to back will our marketplace in balancing strength right all guardrails. And at desire underpenetrated sheet. of and our disciplined our the do. prioritizing in believe markets,

In of long-term we areas of short-term all the test The were as limited are benefit. to quarter, that this our across of or operating ensure immediate actions efficiently some derive we which very around costs, was many intention took our to deliberate of reduce business. action initiatives as centered possible

areas pet reductions acquisition able and of members supporting While fixed our or responsible organization and areas directly these in partners. improve to efficiencies, many were the in expenses were not predominantly for

of enhance of platform. and the a long effective has the administration in further made the very policy deployment of awaited claims In team our our next capital, progress meaningful adjudication to development efforts support some generation

more easier the approach Trupanion Trupanion. engage we stages members quarter we to see we for and about with be year. Subsequent designed reduced expenditures capital launched and our final website our prospective members As of to to should learn also next and migration, end, enroll new interactive

key us positive cash priorities, back combined second as actions achieve related a free In and on to performance and pricing this solid flow further quarter needed throttle to of in as ability goal to position year. well to totality, fourth growth a as across half deliver proven our the our capital deployment

QX our the With hand for through and remainder the that, of Wei it you outlook I'll over to talk to year. results

good Margi, Thanks, and everyone. afternoon,

for details my Interim provide additional call quarter performance, you It's quarter Today speak outlook and will as XXXX. the all CFO. of with year earnings second well share on first to I as around third our as our great full

the and million Total year-over-year. revenue in quarter subscription $XXX.X million, the quarter, expectations. XX% was $XXX.X for Within our was business, up revenue ahead XX% year-over-year up our of

to year-over-year retention XX.XX% our an a average XX.XX% months. was on monthly all year average XX, basis, products across XX% in America's North compared of XXX,XXX Total XX-month life as Calculated subscription pets over prior increased subscription of XXXX. pets period, to of our June the trailing XX equating to

Unless it otherwise noted, eventually of presented business, including are will geographies on a by products, influenced I'm consolidated Margi be metrics basis new as today the discussed. sharing and channels mix our and

Our European included are our currently and today. underwritten underwriters in pets are third-party metrics pet not therefore by per

per was revenue the quarter pet for average Monthly $XX.XX.

will and quarter This new quarter. also $XX.XX of pet the was Average ARPU pet forward, moving our America business subscription out new in we break for ARPU. to in North book

down reduced growth at pricing growth contributed it XX%, pet revenue XX%, X%. the Breaking quarter, subscription of by our year-over-year for mix while XX% increases a

Lastly, X%. reduced revenue by foreign exchange, growth

ratio $XXX.X point a were over last the of loss the Subscription business resulting improvement a million sequential veterinary in cost invoices in quarter. basis XX%, quarter, XX of paying

As in from the reflecting the from in down year prior were X.X% variable down quarter, efficiencies. a quarter, percentage cost the of period X.X% XX.X% expenses prior subscription and some revenue, in

Fixed quarter costs a in of in expenses expenses fixed Absent of quarter. Within were the include new our quarter-over-quarter. flat expenses. would the expenses to revenue America a North the costs, as related as and revenue up fixed XXX,XXX from largely in were X.X% percentage subscription one-time the prior of and products quarter, prior X.X% Europe. X.X% period for expenses year percentage been Fixed have these approximately in

expenses paying adjusted calculate expenses, and After veterinary we our the cost income. variable operating of invoices, fixed

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

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

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

was quarter. the the $X.X for but from QX. up million million segment period, prior-year Adjusted in was down total, $XX.X income in operating operating This was the adjusted In income sequentially. X% XX%

we subscription $XXX new the During in the XX,XXX into the pets, over million a $XX This cost acquisition deployed pet acquire pets. of European per quarter. excluding quarter, translated pet to X,XXX

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

basis As a percentage XX period. XX points revenue, of year points compared to development expense prior the was in basis

fixed and of for expenses was the and the and compared This the subscription reflects new prior of development some initiatives business. step our down loss was year into pet of shift million $X.X new quarter out EBITDA a of our loss million during to as the acquisition variable, period. of within in Amortization $X.X Depreciation Adjusted a $X.X million quarter.

Stock-based was year. stock-based remainder to $X be expect continue around quarter the million expense for during quarter, per million to $X.X we the the compensation of compensation

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

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

cash $X.X was a million, from quarter. negative free improvement the $X.X result, flow million first a As

available requirement capital Outside million of at $XX.X these million credit investments was cost actions in and year. implemented the subsidiaries, expansion additional with quarter estimated along million with the entities, cash We capital facility. of quarter $XXX.X of free $XXX.X and investments, the surplus our we expect insurance to our maintained cash held margin the an insurance second further $XXX.X we which with million than half We the the at under million of end quarter, risk-based $XX.X short-term of improve more short-term our cash million. in $XX flow second in ended in

I turn now to outlook. will our

our both the is $X.XX XX% at would income. and we're billion in the $X.XX in revenue $XXX range increasing growth now to billion, revenue growth XXXX, expected guidance operating representing year-over-year to is for adjusted be at midpoint. of million, Subscription million to at the of midpoint represent year the full expected range XX% Revenue to $XXX midpoint. the be which now For the of

range, operating second pricing year range of of million $XX expansion continues Total flow At to operating expected the half margin book to in adjusted of to midpoint the now in is income the actions our this of million. more through business. meaningfully the in the be $XX our adjusted imply as

third XXXX, to is range million the $XXX of quarter to expected $XXX be of For revenue the total in million.

range Subscription the revenue is to million. to of to expected $XX in be $XXX $XXX is adjusted range in be million million million. the Total of income to expected operating $XX

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

projections, end used approximate you our and we For the your the full was in guidance, XXXX rate June. for quarter the rate XX% which third Thank today. conversion time a year of at

hand will back call the Darryl. I now over to

Thanks, Wei.

I it shareholder reel remind our available open we questions, annual IR website. on our of for wanted highlight Before up meeting to you

In at attending events. at the will Canaccord Conference. We and and & the investor Street's attendance Pet in to Annual BIGX speak Conference in will to attendance York next Genuity in Margi in addition, Lake week, be Growth month, we Virtual next be we Boston hope Wellness there. Conference several many upcoming will you Jefferies of New be

for We'll it up open now questions.

first The Instructions] Maria comes ahead. Please Ripps Canaccord. from go [Operator from question

for my much Great, thanks questions. so taking

What's of can of there quick else? regulators, follow-up? a anything you rate that the with the that received the timeline I you're progress increases time how you in anything to data First, have refiling? terms more filing to latest doing process us presenting California the sort this your terms approach maybe around up different the in update so in you're And on recent either then And of approval you there. is

Maria. Hi, Margi. It's Yes.

we quarter, within the second during did California in progress the with months. pleased get eight are we approval overall our So

stacked to is the had So the approximately going two rate months, approval last in we've eight XX%.

based November that in data June that was XX% in was the of XXXX. rate approved on terms In

specifically answer approval approach, from week. So about that a have next question We'll we're what which once be market, will doing through to and your now, effective start different working in second QX the live we filing, which next related data really XXXX. coming with on again saw of through that in to the go kind and into specifics them the we're of QX we then

we work six in trends the specific and effectively, I to and better into finding into the seeing fixing last this the big new be have overall, to them we'll a forward in help to think for loss we'll the to our articulate the rate California dig able step that we're there So it's ratio. months bake But state. need with

We where a in step. California, into State now can can future, that collaborative but to in the in neighborhoods, looking additional and increase our California market next which in we of growth addressable will approach it's pricing on the have we continue to reignite that more to speak forward lifetime relationships and near rate dig

Got it. helpful. XX% next of the That's And target then very towards OI year. mentioned you adjusted end

your another of with consistent predicated feel handful remains approvals of under round enough like or a this have is larger your sort you belt? expectations, of from inflation assuming states approvals So you on do

right. All

-- what have Essentially close the flowing the have of year, means that will year. to by hold XX%. this about end that will be at we rate the XX% of approvals have state we'll So is we to end

to more that we goods and to not are monitoring of XX% expand inflation that going if that to above doing approval to it. and say So though is in we're I it's What true that holds. go rate for continue going cost

allow see to us to up that continue XX. year, which catch flow will on through next XX% the will We into

our that see saw had if XX. in change gone, in to flowing XX, getting expansion. through This we see margin we and you don't So is mentioned, expansion, true a rate assumption month you you that just a book, we're that why if higher XX.X% which start as rate holds margin

have We place get end and that sufficient next rate us year. of to on we plans the believe will track by in

to things right have We changed we plan if will that. will approach, keep we adjust our in we that get monitoring feel the confident it, place and right but now

helpful. Margi. Got much, so you Thank it. very That's

Thank you.

ahead. The go next Khajuria ISI. question from Please Evercore comes Shweta from

Thank you for my taking questions.

is what So have business. once approved it Could the or you you the a follow-up, if that impact what does what expect not then California to please? if And then is alternative you filing, at for. again rate lower the -- are about than I overall file of and/or talk -- book approval point on the the or if and get

Shweta. Hi, Yes.

- have is us filing do the California latest for has little the really we further we right just been. site allowed So what the mentioned filing as rate California into I rate bit to go now, a than

looking we margin where value we weren't back pulled and our deliberately hitting we proposition. to have where didn't target areas We're spend. very margin we our So and strong have in our, at

We growth. value proposition, were giving pull greater started to that that our back really target we

areas. and and we've next able in we in into dig So the about little approval, see delay on an further in been do rate California If to continue monitor terms is. extended to growth we get bit rate where a other adjust moving on have the we where in depending and our margin we'll where we that will effective of are strategy growth strong operating approach

in look at kick strategies, more that we kind started decentralized just something to geographies. approach we terms - as this look as something that and we is this is our different to about really should approach into to more distribution products, a really of expecting be more decentralized do of we we management, as granular level in This different

part California thought of one biggest as is the our business very long-term. not our the to we distribution it's while about of part and that's deliberate So business, forward moving

data we adjust sure making the as right So and checking calibrate, we'll we and we'll the value will keep have proposition that necessary.

right for I in State and of California. But them we relationship very work encouraged we're mentioned, the regulator by as what's our positive right about we'll to the dialog and members with the continue feel do with to the now,

were? expected or which maybe long-term And cutting? the the you you pulled on mentioned that those as or cost to about for you. mid weren't some were that cost you talk initiatives savings the your one thank specifically back you returns then Could Okay, of part as seeing of

really it's board. across the Yes,

will well unlock deploying few do a the that would new at we So us look things there channels, as so learn as, doing and ultimately I new new we tests, new avenues, tactics, whenever things capital, try so things, of for that future. for say, some ways out some building help we test, are

to with also doing whether in it's So it's having and new partnership that that that whether people related teams are breeder, we're social bet, a that media, things. things testing

So proven set it's about can existing today ensuring doing around been as or leveraging back, even have much and driving that quarter within more rather results of as deployment the tactic necessarily the not that bit things little team a maybe we wanted. with very than today deliver we in so be that we return a the stringent that's and capital. pulling we're can We've that is a deliberate test, the the we

we down very double we to very focus the that things which that the being we're drive holding is channel, and strong and It testament us true channels, to our will the vet deployment. know product doesn't our more this we immediate in core the have. it with stayed harm allows really quarter, just on impact how vet channel discipline to And results capital of

we in more with X% mentioned Darryl investments. XX% as Overall, opening his remarks, less pets got

very forward. things and in we're a deployments, it So, still will growth disciplined of to be and moving continue I terms being as think distribution

thanks, Okay, Margi.

you. Thank

of Bank Josh from comes America. ahead. go from question Please Shanker next The

very thank much. Good Yes, you afternoon.

your of such terms going where maybe approval enough are picture the that not did you California taking require of states you've out percentage business about rate In adequate, in? what is thinking approvals feel second, forward for gotten comfortable very of the a

break It's the historic into multiple at Hi, I took we is very down $XX markets, business, the Josh. and three in, those kind North pets our is other really Two average about we're a P&Ls. the ARPU markets. good it two America, This is the question. breaking of our into When total $XX. that about look of we Darryl. business ARPU markets, have subscription new $XX, about you new if come different average

have area margin the the could had about priced have ARPU, dramatic where nine The compression is there ARPU difference. lower that and the you higher areas to the our to a is six with $XX So months. more over we today we value last is that proposition adequately actually see

that, represented our to in new which we addition look of total quarter. XX% new the In pets about products when have, the at that you

Most of priced those for. adequately are pretty

expensive where core team So challenge the our growth us that's in had is slowed receiving we've as in approvals Margin in like, XX been the And more we've of for country the the quarter. areas there. opening and and the subscription have products state the approvals, some in last remarks, had the biggest some of we've the

on our put to able we're because priced. gas, foot Now adequately more back the we're

but So of it's have and granular a it very state, lower pet doing to take year. something by way average neighborhood down need $XXX able just in a acquisition to And they're cost $XXX monitor to distribution the you not in you always be the to but products, level. monitor, across your single channels, for team to

testament about in the feel those the it's progress. really the, I spend think a to good right the and direction pointing team

the that's the receiving into the first it first of expected movement the coming specific neither I you greater you retention increase. is XX% Thanks numbers, Is but dipping it little book had for obviously, that rate I answer. coming increases And XX% in I getting should be years, prices. majority nor as bit, need of at look XX% guess given when it year them those anyway, bulk. the a don't don't a I in raise or that think or rate is

coverage, our out. you still slight have that double so as That distribution that XX which lower interesting, of months average. loans and reminder industry those products initiatives, it new over pull because retention, includes what a it's Well, the in the well includes we channel, new if think

the to think last couple in been be what average rate retention the very our years. of I has would similar

pretty and in it's shareholder our and about So three average year between very letters it there talked have that higher. first we consistent strong. increases remains And that buckets rate those

So nothing dramatic have there. you did Margi, - add anything their. to you change

retention QX - right, we a I did It we very in business. of see our of like think mean, expectation saw start bit We the we softness and as is more a feel that see generally, I coming bit strong. frankly, rate, saw end we about retention a but you're get we more through. the book the quarter, of little the little a been very has strong

I job XXXX that and a value of have remainder will the sure place the for of in very XXXX. as very that that done think execution increase making acknowledging up rest the in has proposition through the of rate and good a understood robust year, team upon and tick well terms continue into they to

we So that feel granular monitoring those more and confident scene and and in way a lot are keep will the managing far, behind there's elevated the It's buckets. detail their in process that the with mentioned What is book business. months retention real in have there as you of of way Darryl the mixture you metrics a of overall in terms XX products. said

experience so very place. in profile earlier, as good XX% the going see different a difference retention and we products you're but and we too, as different very that in those that it's about to and a well feel out like see mentioned different see retention so take retention newer geographies experienced a good for We starting we to that far

answers. the very you for Thank much

Please Block next comes Stifel. The from go ahead. question from Jon

Great, Good afternoon. guys. thanks

the subscriber First you for talk just about question, the back path can MLR.

good still I pretty came XX which darn it's bps XX%. down was think elevated at it But Q-over-Q, see. to

you when call about and XH bit back we even the you XXXX trend to back it, should sorry, XX% into of and some specifics a that little California Do How York. that New want more to give XXXX into Southern the target. back you of part of - half can think the XXXX. line, on get You've got think

Yes.

- the we think when margin see we're fair expansion. happy that about to So

back loved over more predictability we that have I a last about and plus think to little years. known it's bit the XX

of rate this flowing through by terms by continuing In we the have that year. end through QX. We've the got of increase to at XX% this

thoughts value that across of closer So increase to our book inflation further of to without proposition XX% you still the continue can expand rate see even business. and expect to in the mind, with brings us confident margin we

the towards, target if the in we retention flowing back year, will But that back and end of expect Combined we happen of our rates it will confident adjust end in XXXX. If with then we obviously, be accordingly. changes that we through with that feel we the place that the continues, and change. plans by have have see We'll next to

Okay. the differently. that Maybe it need this of flow to there your target. line in positive more free a cash just Is into you order trend certain ask hit part back year

Yes.

Sorry improvement mentioned, sequentially for good cash we some as positive, quarter-over-quarter. we've our flow seen free

million now cash. $X.X in in think where I right we of all terms So benefit of terms

the quarter I think the of year-end. for in - expectation terms

in still with our Sorry. we goal. that we're have in and QX rate much expect still making We good QX track terms of flowing progress fully on very the is

at have hit second is And is of getting the perspective, on employee of changes think, that of you follow-up said, that. the And I Trupanion the maybe we the is it's bit thanks of unchanged, those a more retention making about for from just PAC retention Darryl, if that, some your might or some plans, and benefiting lower-end sort just one-time so the is if an if or employee hey, I it Darryl, that's also those from guess would first a a if was be different question be little wasn't I for count clear, I talk I you if thought clarification, curtailed. Okay, normalize of a that where but company topic, we XXXk right. can largely some but expenses. from parts, it you couple don't intra-K mentioned XXX,K being know severance was if to

- be make that costs. acquisition guys. just want saying great believe showing sure up But Thanks, those retention both hitting I on your to places pet plans job to but done You're a I arguably. lower benefiting you've in have pet. would lower-end PAC right a be how your

during - QX. was I'm on headcount Yes. as There opening sorry, we expense. there. There answer reduced a second it The in And yes, we XX% you sorry, pets Margi Margi, enrolled. just question company that end. X% the that cost is, me was X% pet some reduction alluded reminder, part by got across severance and our her more had probably, in that remarks. of we echo a was the sorry. can on my was yet

the During pets created but quarter, are equally. all not

and higher low retention have have ARPU higher lower these So some ones of retention. pets other and ARPU

it from, way important pet the acquisition dramatically a you decentralized in we're that drop spend very you amount look at So did is in that that corresponding see it's when we cost evidence an it's doing that.

question Please from ahead. James. Raymond Next Burdis comes from Wilma go

period to off, retention, starting - just like off from the a time. that know business us three XXXX the looking you take portion period time in evening. some give have you to a bit opinion a maybe years. roll over roll could what the little of it then would at business I'm seems other five for I Maybe Good bit shorter color little of on Maybe

is Wei. This

So for this question. I counsel

So I implies guidance and the - subscription for the QX for new basically full-year also total business. other the revenue the QX in prepared QX the guidance revenue gave and it's QX remarks, of and

decelerating, rolling the still seeing been We of have growth our but off been of has the book. pace

than slower see we had expected. Let's

reminder, between things, other And for business. with growth expecting the of year about this declined we XXXX, than X%. this smaller the believe usually still But of and margin right other a lot at to digits versus revenue, much half year X% arrangement subscription we're business. So now will last do of it's revenue still it model looking our given as our but uncertainty, forward. We and going new be that from in but decline, a X% there's is single start second

say, it's revenue TARP years of would too reminder, say I out as our And say we tail would our There projection bottom wouldn't XXXX, would more off after terms much long pretty to going And a a our capital The before. quicker I capital also line will impact in if to were than based performance. they be I effective expected. be experienced position. of

you. Thank

beyond. maybe So continue but Is revenue should should, XXXX how done. interpret declines, what guess and for that I I how single-digit

really be say we be would other XXXX to I much this on XXXX. the to slow decline for it's started have I'll next haven't that. over too for fairly five years. going honest clarity the That's business. three But not I do

can add It's well. I as Margi. just if And Yes.

single-digit from in as able we that want to another and Just to want be first the what we're support I anyway upon to support growth, you is if partners, we're to to make business be expecting the that saying, echo good them sure businesses were place. perspective us came to

sufficient that roll main increase. ensuring them. from terms and alluded the in off, that we support which us of is partnership is it's So benefit to obviously, on their here the thing we'll dependent But the be for have margin, Wei certainly is funds

as they longer for It So look to anticipated. continue seeing to everybody than has will we and we that forward when little changes upside our we of be for and part business happen. share

think is Okay. one over give Could quarters. that XXX you noticed you on a about cost of little about this commission-based of that should million quick the last Pet expense clarity that what just acquisition that was we policy figure? pet of acquisition or a bit line out We few broke then out one. for is And item new and the netted quarter. how that $XXX

question. good Yes,

year. of acquired As a last pet the half smart expert reminder, and second we

those the count total they Europe. third as model, since do key report a count, did party our not include and when a those pet subscription agent in in results quarterly metrics. policies. business a we The currently policies we are the they But insurance reminder, under So pet test business by underwrite underwritten load then, commission-based

revenue their are commissioned. So

every So provide the Those the not metrics, underwritten that's since do not do third why, by then we European report per look include pets at pet if especially. parties. the quarter you

when to do underwriting cost because totally to excluded, it reconciliation pet The make that's per different doesn't every this the reason the helpful. single pet has the $XXX model. profile the be that's I So calculate sense. for revenue acquisition our hope we average pack, quarter that

Thank you.

question Katie Research. Sakys comes go ahead. Autonomous from next from Please The

thank moved you bit two subsidiaries like were at guys into than the And Hi, meeting, looks capitalized. more sounded quite it insurance the you. this shareholder a adequately the subs that ago It months felt more cash like quarter.

- requirements. increase above So the of I'm well why why kind the move RBC curious minimum

Margi this chime This Katie, answer or Darryl, again Hi question let Wei, I'm in. is happy yeah. to

year to to our basically, provide I to QX. positive position. in second about we're more has confident our wanted be trajectory. So I'm happy increasingly our about about improving free mentioned confident expect cash a what million-ish improve I we $X and cash been The in is position. the that about cash - little before I'm bit we flow wanted continuing very reiterate flow being better to more cash and than the sequentially of free QX the half clarity

insurance in than we entity plus $XX also requirement of million credit just we more outside more and company. the And we million the color cash the and at the company the the transparent on between have do can insurance $XX capital little bit a cash have more at $XX company for we and position as see the have provide facility million and holding you being insurance required

the near So capitalized future. gives is over us in million that we're appropriately that believe we $XXX

Yes. Margi. And it's if I Katie, well. bit can Hi, add little there as a

we when we've to news continue that is to adjusting terms actively have. capitalized that money that additional, - are we you're we put to in ever the at don't level why is and there on In we are right, good need that capitalization ensure our that of working already the

So historically, heads Hopefully would there over continue hear some blue our we are that. can you angels have me, now. to support right to flying

noise. So apologize I the background for

segment much in at higher to have were which level, continuing the will we're combined money we're this our growth are possible. happy the the that before. But just RBC We're as hope business terms of as over not had that that efficient that of when we that for means other to in above is at than few our at growing explain, well that work can levels what plans we months, Trupanion levels we put allocation we we obviously so both stage next that through capital ensure

in the you follow-up be Okay. side? characterize things cut to quick question. of talked How And need margins marketing as half some I back about you'd that doing in be? the of much XQ, be expense cuttable, experimental your on know then much year could them potentially to get like you if the where guys marketing How of a as would

Yes.

about here. take will to already point our at reductions some where always continue marketing, that have looking channels. if to the of thinking rates we're the our So into go so really can business core core We talking when specifically internal about us we're came we're further return. PAC, There QX they in been the

rates the just geography our we area trying internal understand really key in the and to for what what books. to thing we leave as do spending a on way return we the remarks, we're we opening or historically get in is versus product got or specific reporting need the us of allow here have granular to And it be to decentralized

and for that cutting So not example, at are be when about return in time. expense going imply we're drive that we to talk any point to - would there not that doing things going we're

are driven clear on activities from So could to We the already we made further done. we've spend, PAC - have than the we've being reduced to sure value XX% we like probably teams are somewhere XX% driven go take contract and producing. down things the between that that

we've to If need where got they be. margins important It's day us. for

not that we're approach. looking at So blanket

of Looking are come level from healthily market strong We there within approach. proposition. a value granular North margin, areas seen we lots we that's can quarter our can areas lot of where have see the you've has hitting addressable across growth the are our grow America that a in we that at very and

that. have as to rates we of didn't return could quarter. in act grow And internal the quickly continue as confidence in the We have to we

places I we bit little in probably think could we in money where areas and of didn't have. enough we a spend that shouldn't we

QX refinement. think further is see I what So in you'll

strategy that's operates have us had X% not a PAC really before, said the in a products distribution that new market, and from PAC had we would whether we a new and XX% from that so areas it's lower in we of for would strategies what growth level in spend. being hold at to That test growth allows slightly taking perspective being we kick reduction more said, opportunities do, in,

products, IRR So core not everything be all to other the our PAC, bring guardrails. geographies putting other can through sorry within its business. into to we're It bring that

flexibility. So we have

growth we our good distribution doing the us the margin expansion, leverage We are more a compression gives and we an we do. exactly is for far to so which can really it especially that lot the direction that's to year. had moving margin we've And see what through year, intended about feel appetite as we end strategy, it as fortunately see this able to

free Yes, smart thing, executing disciplined towards. cash goals. our what I'll is last about in just the growth one we're flow being and this add are QX. positive That's Those

Thank it. you. Got

comes John Piper from The Please Barnidge next question from Sandler. go ahead.

the good toggle Thank My ARPU the their an approvals changing dynamic it deductible that unchanged. and the with much on at keep and subscription congrats you all. and filings. Is question very payment and and in to receiving afternoon. individual on Is XX% increase with pricing significant we how becoming frequency then rate about a should think the

though breed, even few mentioned geography, we're It's mix been No, changing pets, about And putting seeing that It's through, about to expected are the and these businesses over we've years. of we we about so the we consistent. last we're we're of talking we we've up. where What that for talk haven't a quarters, is been Since pets. or as it's talking we're last XX different we change. we mix, about actually, - when acquiring age talking that rates species. been consistent see watch It's seen come is something not

to is cancel, but our may in driving should on members, happening speak how of experience some increases that into they is in impact we a the proposition think really be team, the team terms we often and the either. about phone rate that's to a of are we netting. call members, shift ultimately the what's there able of the to the if terms value looking the up hasn't - end there the changed But that all they're explain So ARPU

that around. all in deductible we happening now to prices we you the I that to like moving. get they mix to we're understand strong seeing is why help with We're we're And them number mentioned that no people industry, So, trying seeing vet reaching what's really sure call making business. what of coming by increase down ARPU or think of understand retention. at where over proactively And I ultimately out these largely that members through is so can have

new $XX America excess up ARPU difference So in on have America you've Darryl from mentioned then got got earlier equated as North coming XX% have in you've areas areas new North in that we we of such where ARPU, $XX of the business call, across two And ARPU. to XX% our that have a business. a with

two when look those you have you blend. do at So together, a really

page, story, doesn't approach it ARPU growth see tell and the next won't quarter and down more granular full give is we about break doesn't of really ARPU rates to that to blended to be return. go of which that is next able that us how we're So to component far - why how thinking one internal

we're So will that I looking pricing, see which assuming come the were expecting what in of is cost Does growth, up we ARPU is good your through goods we to our those show margin by then which that the of in year-end. think terms expansion, that John? for from thing answer continue we'll the numbers got have and question,

maybe And under much. Investor at renewals you then semi-annual considering that's Thank Day does. about consideration. it you still Yes, can very talk your

Absolutely.

in our adjusting what to that best members open experience. make can to. sure - always the - we're regard think give that's to I we that's And was

that a the cost to So care. accurately of for our budget is ensuring members there way for

leaning population whatever to for card uninsured friends, savings, afford care. the budgeting, into of that the Now XX% the do credit of comes the that's often can through really they cost

are year until that they've monthly a where insurance it's increase. XX% are to for It's different X% that's Trupanion, increases little rather more every the to able is and people we payment appropriate seeing giving be consistent have fair bigger insured increases feel year-over-year. and different those provider. into It's plus than we been industry, slowly pretty insured those This had different. a able because up are to budget, Those for recently and a move

always to the rates industry, we strongest less mind. retention We the our is that they lower are, of best why product believe which to are Adjustments front have coverage, in retention. product the our

We period adjustments through important higher I retention. such and making to renewal to coverage have And process very the as that and very, is of think us. renewal dates high tweaks

we'll at in So that that that will year. we'll over is right that. the next but goal, continue market something doing nothing be plan now looking towards There we're that

Great, thank you very much.

Thank you.

concluded. question-and-answer conference to our The Due time, the has now you Thank session. attending concludes today's this for presentation.

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