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TRUP Trupanion

Participants
Laura Bainbridge Investor Relations
Darryl Rawlings Chief Executive Officer
Tricia Plouf Co-President and Chief Financial Officer
Margi Tooth Co-President
Maria Ripps Canaccord Genuity
Shweta Khajuria Evercore ISI
David Westenberg Guggenheim Securities
Jon Block Stifel
Ryan Tunis Autonomous Research
Elliot Wilbur Raymond James
Call transcript
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Operator

Greetings, and welcome to the Trupanion, Inc.

First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Laura Bainbridge of Investor Relations. you. Thank

begin. may You

Laura Bainbridge

Co-Presidents. welcome the Participating first Darryl on and Darryl Margi Executive and Margi earnings results be portion will Rawlings, XXXX of conference Officer; joining Tooth, and Plouf call. today's Tricia Tricia to to afternoon, prior quarter calls, for Trupanion's and financial Chief Similar Q&A Good call call. are today's

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

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

Darryl Rawlings

to is this Thanks, attention earlier which which will This good Laura, But off your start. afternoon, my letter, share point and apparent QX results, XXXX was is a flying first, I everyone. want in week. Shareholder published to I Annual to momentarily. our

intrinsic Trupanion's includes the metrics annual As that drive believe value. usual, it key we

most the we copy strong partners, XX-month Some revenue in is as or in our year-over-year same-store adjusted plan, strategic growth the of of number excitement so, includes shared all as is income. the are of people. plan. and and of we sales, about you letter metrics operating letter as down to the you'll our increases highlights, territory return our comes strengthening active growth annual X-year that In different They to a us this comes including Trupanion includes the rates call our and to sheet. our Ultimately, financial the well and show intrinsic Co-Presidents, of down and year's Margi, value. execution, a it What In balance would share the vision in to it, of hospitals, also at compared headed the the road our doing plan to future. plan. execution and plan for out for I share teams ability revenue meaningful Tricia encourage execution in hope lay responsible map to our our I read against are we deliver where for internal it. of leading deliver the

that and shareholder on the outlined responsible for to opportunity direct will individuals strategic meet Our and XXth meeting with plan. have the be initiatives your in teams upcoming are the Q&A June directly

of shareholder via and in Our Zoom. thoughtfully shareholders be year, information you'll constructed able hope annual meetings each are to the source we for valuable attend or most be to person

As earlier, to off of months worth start. are our XX-month the repeating, it's a plan but I noted first strong very three

me quarter million. increased our to We jump in able revenue exceptionally growth, QX, in our subscription $XX.X were quarter. at Adjusted on estimated leads rate XX% XXX% This we of first which all In the deploy increased driven let results. XX% of So, was subscription new in pet XX% is operating income within XX,XXX funds these business of increase into Total increased subscription and conversions across Growth of to year-over-year. increase net by XXX% both an an from approximately pets return total, XX%. internal channels. added benefited strong.

seen given marker can brand be strong accelerated We of impressive growth. expanded retention, our additional which our is our in continued presence. accelerated also growth One saw

grown the shared of bonus search to team, the been approximately to XXXX, we in with slightly in $X has increase months, six value that last by XX% XX% grants stock a million estimate increased and one-time number million including and insurance United In of all the the intrinsic term down. people Canada, team while States, members. searching flat we for this billion, $X.X $XX Over by in pet the Trupanion we has

in can be Additional details Annual found letter. Shareholder our

making $XXX retention, been as longer-term is goal as have strengthen rates. cash low-cost areas afford position investments well With we cash with of provider. in that position, accelerated our and with improving in Our position these help assets experience and well to technology over strong are strong the will capitalized like our financial of as million, we growth the our member

our QX moats gap of seen market. opportunities, XX those of Nirvana, brand large call already scale, just intended between more to to seeing pets our With achieving benefits in from a hand a at TruTopia, come some our as and operating talk we've X.XX%. industry and to owners, on, we more over early used the and that in key Trish to that over existing Broadly, or what difference referring friends which the reached we're underpenetrated opportunities defensible churn, manifest I'll years and pet in position that, quarter measures have the results. experience, about While a new adding as reminder, refer metrics. a record

Tricia Plouf

performance Thanks, was strong Darryl, quarter for and will provide Trupanion. for that and an discuss the second quarter first also echo our I good full-year afternoon, quarter our exceptionally and sentiment of it XXXX. outlook everyone. Today, Darryl's I

outperformance XX% up extended Our was to Total driven quarter, retention, XX the by subscription subscription months which quarter XX-month approximately growth with for Within prior XX was in performance $XXX.X in million, prior within as XX.XX% XXX,XXX average enrolled the business, and in year-over-year. period. year-over-year. basis, was our pet's XX% up business pet other Trupanion XX.XX%, up the an The $XXX.X our increased business. was subscription XX% strong Average in is period. revenue calculated compared pets the Total million life XX. pets to acceleration a within months, year on continued in revenue to March year-over-year monthly from of the retention trailing improvement XX-month our

retention prior current letters, the we shareholder different have the in three in retention and one discussed being in with As look year. at first we buckets,

remainder see increase to rate have quarter our while currency to retention, improvements do retention buckets, current an trailing per don't we the a Monthly growth growth. rate, the to it revenue the in basis. or we seen project a average the during retention as pet year-over-year retention on expect for $XX.XX, of While overall of the year. constant increase continue acts periods first X.X% Based on of was accelerated XX-month improvement X.X% within year various blended during still we headwind

to on X% X% payout increases to target pricing of ARPU continue focus position to deliver hit We our ratio initiatives XX%. ourselves to to between of

cost revenue the Our of expenses. subscription and invoices veterinary of variable paying cost includes

revenue, percentage business paying of in a variable our future systems, and people, slightly As automation increased more was reduce to frictional deliver expenses of the cost subscription XX%, XX%, veterinary claims continued experience. to differentiated investment invoices for capabilities and subscription a reflecting and member costs both

as in We the will we continue short mid-term, continue areas future long so see to benefit. invest to to these in

majority were increase are our of subscription revenue revenue of primarily $XX.X million will and net other million, Our $XX.X of other quarter, the Total expenses, than more of generally period. our discuss and have within to that was year-over-year generated revenue increase I momentarily. in year-over-year, operating consistent other prior period. $XX.X total, this the that X% in $XX was with detail from an which million prior increase million at vast increase fixed of our the in an from shared the quarter, for subscription BXB segment our in profiles The segment. operating of quarter our period, the year business for million over comprised different revenue other of business products in year our was revenue. of XX% enrolled and and the is $XX.X subscription our prior segment improvement business same during compared adjusted is the and in million, services X% business. an Adjusted Cost an due subscription over year other In increase line pets margin loss was of both the business, to quarter, a income the income was XX% services was that from support $XX period. revenue component The in which business XX% segment

of return During average rate new of XXX% acquire resulted in internal to our we an PAC to pets. able for XX,XXX single quarter, the operating a of adjusted deploy subscription pet. million estimated This a a $XXX approximately $XX.X in of XX% the quarter, were income

is to rates in pets quarter. our million costs market are were so. do strategy, are Given to Development that well opportunity, $X.X our core and the large expenses related development adding pre-revenue of strong to capitalized exploration at that are or and we internal product return

financial operating materials to For supplemental how internal on on Relations the please our more portion return income, adjusted refer calculate our website. detail Investor and of rate we of

was of adjusted growth in letter our XXXX Darryl in performance our fourth consistent related first the in As overall at return. intangible pets resulted of intrinsic $X.X million When count in operating calculation X% income adjusted software an increase EBITDA our quarter, our $X $X.X during from diluted million the total our amortization acquire $X.X $X.X earlier. due pool able which discussed, compared approximately the prior February, compensation to rate and of the our year-end. quarter, million The stock-based internal year targeted period. period. year deploy value which from prior adjusted compensation This annual reflects new the quarter was increase quarter. at performance year period. was the million were shareholder our we was grant million is Total expense This detailed software $X.X up and development I in the to of for increase an with primarily in of assets with in mentioned the just from plan, and million during acquisition QX this quarter, of that loss as EBITDA the our share to the of initiatives, XXXX all to of company our amortization prior combined Depreciation to is

a this $X and the performance a compensation and we happy in was with team. impact, for As which basic loss or $X.X onetime of grants around million of Darryl and or $X of year. a and Absent mentioned, the net to to XXXX stock of to had onetime share for very loss our grant amount compensation compared $X.XX million a increased $X.X the fully share and our to and compensation diluted this $X.XX basic period. We million strong due the to period team performance year $X.XX stock-based prior we're the per entire diluted loss this share, in to diluted to net the recognized loss year per remainder Net be the $X.XX period amortization. due in our and increased was quarter. million of impacted in million, compared compared in was prior expect per basic creation to was stock-based portion included year to XXXX, value expense depreciation Net expense share per prior quarter loss $XX.X

accelerated growth and impacted compared our period. Additionally, to rate prior associated by EPS $X.XX the spend acquisition year

manage view or cash cash profitability global linked. we growth operating revenue a business. at we breakeven reminder, guardrail and our Historically, measures flow was and strategically to the a as As above which

our execute on front noted in of we're a As very financial and way capitalized our afford we in our we growth prior and which is can calls, the position us. accelerated in opportunities strong,

In support spending and more mainly on addition, items, new in to product we're capitalized experience our member software initiatives.

of $XX a $XXX of business, $XX acquisition, to end, was year, million, would XX% full-year approximately our subscription At the per to full-year negative cash generated we XX% $XXX expect the $X.X to million, of over $X.X the at in in around quarter the As are in flow no to million free in levels, of results growth guardrails XXXX, targeted At the prior being within million internal pet total rate flow compared over period. revenue midpoint. XX%. $XX of million, within $X.X now held period. revenue million investments of PAC Subscription million and $XXX pet. million the quarter the million. we I'll compared a flow XX% $XXX year prior the expected free operating which the in in to and updating cash now income of million, year rate be total range cash effects our cash expect We value cost-effective acquiring the result, $X.X outlook we negative through of operating in to XX% for our revenue expect our the Operating We these compounding million, increase in account $XXX in adjusted return created the around which quarter $XXX turn over was an QX. to million of we pets for of most believe to the over-performance from the of range would at to business. is for debt. Of invest with representing subscription is return internal our of while prior

as million XXXX, $X to as also For to million spend the business. development well our discussed expect earlier, we initiatives on full-year other $X

revenue million is the For the be in to expected Subscription range million of second $XXX revenue to range $XXX be to quarter, is in subject total the million. in most the representing to U.S. revenue of expected are fluctuations, keep $XXX between to growth conversion mid-point. XX% please year-over-year million, at the notably $XXX rate Also, and mind our currencies. that projections Canadian

For projections, a your our March. you second of over turn full-year we used time in today, the at quarter will Darryl. and back the XX% and Thank call conversion I was rate which rate now end the guidance, our to for approximate

Darryl Rawlings

Trish. Thanks,

I event to mentioned participating if offer Margi, shareholders, be our a person our Before able Relations on repeating, you Zoom. investor ensure to website. and but possible will with you I us to vaccination to as was to want of the With Seattle Relations space. our for headquarters. June open will visit as relation interested Investor enough and soon Shareholder excited This for register via immediately earlier, Shareholder questions, we're on as hosting we I can are designed up our we long-term annual encourage to XX. on Meeting have in limited it rates And proceed at website will you attendance weekend, to so connect the our Investor Annual the increasing, be again Annual Those events. in-person held for be and we hosting once few myself Q&A remind event event in Hathaway upcoming Berkshire This register Meeting. like-minded Trish, worth

join unable person, upcoming offer that, webinar. you a those these for are who at us see up a live For to hope broadcast in via will we to events. Zoom open it we'll We With questions. of both

Operator

Please with proceed [Operator Maria question Canaccord first Ripps questions. comes Genuity. you. Thank Instructions] from of the line with your Our

Maria Ripps

strong letter. on shareholder results, the you Congrats thank for Great. and

these new anticipate coverage very of are always, plan level speaking, currently a have informative. Can newer I to these consumers? covered around are of maybe broadly products? core plans? about you of the where And that some in these for that are that Trupanion for discount what offer your questions be guess you it's two talk anticipate As conditions subscription your will under be And maybe not maybe under couple for just covered core providing you your how two compared products. the two to I pricing, plans that, to just positioning of the these related you same pet? for do range terms plans, the

Darryl Rawlings

Maria. Thanks,

about a are are low product the annual talked has shareholder offering going coverage, and between And recently they low ARPU the product. such way those coverage, coverage traditional of my published. and to So, a up our letter that kind consumer, we to something identified set be clearly higher in that in a was medium medium products difference that

can want clear to so of the and there's that lanes], [swim level have what high the All understand a consumer and choose. sure have will we products should transparency value they same the how make proposition. So,

are see good it that perform technology they this products now company We our that – can we're to is as excited to on leverage year. launching to the and data well set believe we up planning now in later because it's as do in our where market. how operating do a and the scale, time those We

Maria Ripps

about efforts maybe sort two follow-up, a are talk And subscriber plans? in two brand invest marketing primarily And helpful. acquisition for new of strategy, behind you these can to quick very planning your That's it. products? you direct these Got around

Darryl Rawlings

Margi. to over one that hand I'll

Margi Tooth

Maria. Hi, Darryl. Thanks,

investments products entirely between predominantly. so be to online to guardrails we our return to marketing playing these XX% space the of internal When the continuing going the of the be difference brand, sold will of two XX%. direct-to-consumer, the think about we're in strategy, in terms in So, adhere rates to of

and do change with the to they enter see when products what we parameters can do what those we growth those continue won't that to we'll get shift, can market. won't So, and within

Maria Ripps

Thank Got much. very it. very you helpful. That’s

Operator

you. Thank

Our with ISI. next proceed question line comes Please Evercore Shweta the of your question. from Khajuria with

Shweta Khajuria

Okay, please. Two you. questions, thank

letter, what pets? in saw question visits. a additions. terms and please table subscription in you talk First acceleration you on growth one hospitals in is that to of the worked your second active this have the the in quarter the then Could to talks that driving And you really is,

shared visits the that curbside days wonder of to And the primarily clinic it XX software last software you goal every you back I XX So, think decreased Do this exceed get year give be in Thank maybe also sometime this the range year? wonder year, for could maybe days year that terms will maybe or can year you that because levels I you you sometime penetration, XXXX where next to X-year care. sort levels. for some of you. if think exiting too. of penetration or us this

Margi Tooth

Hi Shweta, it's Margi.

So, and questions as I take those I can you. share much of as will with

additions, in retention uptick time. rates a saw overall. of both are leads, Conversion and we strong insurance rates really terms strong in for that So what overall, finding then first worked well, growth so are the very people

really experience, our to referral about we've As we've channel. drive at member been talked historically, that does which help looking

continuing And control. their So to helps. referrals think we are as think which as can and Foundation in kind for the Vet that rounding put a when continuing if together thinking channels people member having about directly of much we're our to best we give growth. The there, have the them seen experience, start we I us. that up brand seeing the that stronger people for of to presence good perform can That strongly absolutely leads do more and of them, well, we all great know all something family we part pets we about see very as to stacking up quarter has they

you're visits, active of and terms right. In hospitals

decrease we in last visits hospital year – see a COVID. due do are to We

visits of We more those to that starting now. XX%, a bit XX% are seeing back still get little around historically, we're

with them back those is benefit say XX can, those do are is the the relationships on field can And can relationships. still build many adding with where What we going get meeting to while long will to safely, phone, hospitals in to over have communicating continuing been built business we with ways our we as we possible as for the years team in still both up and the as we us, I plan field their in of to markets, able our and in last can't soon as course, we've value face-to-face it XX hospital. picking go having themselves. of have that the really of So, back as the hospitals, years

the picking of up keep that working with we're So, year. and pleased up, slowly, rest we're picking the we'll through on

up goal terms into teams of software penetration, nicely, the and you and COVID. expectations In of, depends our – are shareholder meeting. continuing And more of we year. can, more at X-year lot the penetration] talking the of the insights give a it are the for our on The [software tactics pick rest that what for be and about to we'll kind

Shweta Khajuria

XX-day Thank you. call add include comparable say you to follow-up? you Can more the virtual and I If to Okay. XXXX video you to be phone one physical as calls so XX-day virtual? were would and try calls, would if that visits, levels, it a please

Margi Tooth

we've territory only team. And account absolutely. have partners not Yes, that the used got management to

that increased I sure know and there do whatever them. for support at we relationship XX over you good we is be the breadth as making So, we as definitely not of the possible the here it's support It's probably as good to person, saying, months to was is still but hospital, being to in it build last [indiscernible]. give look can

Shweta Khajuria

lot. a Thanks Okay.

Operator

Thank you.

questions with of Our come the David from Westenberg line Securities. next Guggenheim

David Westenberg

and congrats the for growth. on really the you thank strong taking Hi, questions

in above actually are growth know start ARPU. targeting with let's the I you trend. X% or So historical above

can up that metrics sustainability those pet the about adds, the in drives that know I two goes with short-term. with necessarily tell as to be but of you would always say strong seem it wouldn't insurance, growth for you care but you did the also of veterinary think demand that there the combine X.X% I cost get case us You new that, combined? the

So, the the combined – those of maybe kind two of run kind year about assumptions thinking can you us combined. with them a if in metrics through in

Tricia Plouf

just Tricia. Margi it's that start I'll Dave, thought then perspective. saw, was have you more and from sort as overall by talk their add went is the a little outlook, quarter. benefited of Hi did strong. the about process our or Darryl let ARPU. and X% color for into strong over It progress But we in feel our our rate FX still we Yes,

As see you this our is we our XX.X%. and in for hit the are invoice it and of that quarter adding pricing, at invoice on XX ARPU a pricing vet target know, solid vet margin XX.X%, our year expense points expenses A and that did progress is that XX%. We what was top ago, and factor year-over-year. come our to make

would pet we're with growth, and guidance we expect to comes a we reasonable. QX, overall, happy what outlook Similarly, level what the saw in you our similar to like how in our So what is when it and feel very experiencing. trending, we're in is ARPU and in is that put we

job can expectations, we And extent deploying of XX% QX results forward, the exceeded so. Margi continue at mentioned, And definitely that to very results rate capital happy pet in our of we're As to acceleration. we'll you do The around in an the growth amazing going and our do that return. and internal QX. her team particularly did with

we impacted to overall mix the are that most other we be what as mention new on guidance and ahead we're will ARPU by XX% can some in there confidence overall. growth, through products, so being of introduce do good have – can look Overall, ARPU. we year. accelerated We and sort One of in of that variability on beyond business have there ourselves overly go QX not aggressive proposition the sustaining I hitting getting value the we level and focused that. thing as and be We're

David Westenberg

now it. – All XX%. talk thing is guess. up of kind those go question product other that what reminder you purchase the subscription I'm way term as more the it Can on getting new recommends I pets Got opinion. from was maybe increased, The or the buying? actually believe categories, you veterinarian, right veterinarian you One you I mix right. think correlation the your your tend that to than different XXX%. And actually is, to it good at the go about is would that And search into I

I You come just least always never I Trupanion. at I search trupanion.com, or in put would go, home, do,

maybe in And here getting at and actually what I'm how said was did already is quarter, of rest So the meaningful but and take then in – conversion the the questions you up this, conversions go I'll that there? offline.

Darryl Rawlings

also in gap historically TruTopia you retention X.X%. total stat, were growth, at our, increased which And Well, and distribution you're as pets, increased which our smallest was have well opening is we of all at conversions, kind channels. mentioned leads from those pets, occurred across our growth and the spread improvements reflected in the remarks that looking in our mentioned year-over-year net as accelerated of I the

of XXX% drove is aggregate the net the year-over-year So, that what subscription growth.

driving from veterinarians Trupanion, that's we're right. leads in we and take Trupanion. a and are go, You or When look referrals people what are People say, referencing. at type

than increasing rate awareness a brand term people much increasing higher insurance. searching has Our the been at and pet

David Westenberg

it. you very much. Got Thank

Sorry.

Margi Tooth

digital we about and it's we're distribution that channels to about just the to channels well, When kind just making. point the Hi, that the well, as and think reinforce Margi. reinforcing Dave. way as was has I would brand. of Darryl think just that worked we that Sorry, add search traffic

to again, conversion – just when that owner think opposed we really to When vet that we've is Google, to generator, the able pet starts to you have as role channels saying to and is always to strength a there. that we're trying touching get other from really a vet you starting distribution different drive go So, up in owners which that's which vet, if a a play We're the a always as you're new weren't places, to that efficiency. brand to because being there, maximized some a before. piece we're that's about go opening presence play pet brand mentioned, going we're they do we then where lead to

David Westenberg

Thank it. Got you.

Operator

Thank you.

next Jon the Block your line with with from Stifel. question. come Our Please of questions proceed

Jon Block

it's of good it you be in to the still the think discount And any letter, that? how pet through be start then Hi food more mentioned it, bundled sold sold do think first which can health I afternoon. greater Maybe the letter, that shareholder channel. color the but mentioned call Trupanion a In longer-term? actually if is terms the because pricing you margins? policy is bundled going that quarter. initiative, It's And the guys, early, veterinary Landspath. so, questions channel, have other be words, it would a veterinary conviction holder? on it, on and through call the to And with of pivot I'll we offering believe I'll be in specific pet to I you to fact the with, on one, the with going And Darryl,

Darryl Rawlings

eats is Well, health to this could to or – amount is pet pet this And data right in we've and a over equals going XX hypothesis. a of how that's outcome. hypothesis. been for out significant point, a have is if Sure. test area better prove we quantity, there saying that that figure eats we this in they're we've around a the right outcome. going to calories that something do is food, while a high-quality Well, investing a a held years, better food know, And we the hypothesis well it for this have health have at if

be So other. the it right able offer we'll be would able would reinforce saying, diet your data expense, eating and on was if consumer. to it come certain is, if if goal by of the health would to not out gate could discount a a But insurance, invoice of measure to we veterinary eating but big should health of on just recommended it veterinarian, actuarial us on would of brand that by but is a there the They you're on early be we we're some be going subscription, the is amount calories monthly we pass it. reduced pet to to to This determine increase able years to be take improvements improvements, each food. in there to based limited anywhere have two a the XX% that both expect

is to moving. just really kind the Landspath with hypothesis and this goal of test get Our

Jon Block

in Got at in I the a XXXX dangerous, think $XX,XXX quick Perfect. bit $XXX,XXX more some per $XX you're is million call a $XXX math, implies deploying just for about PAC, or it. adds but quarter, mentioned gross you spend And always quarter. it which

of You the You $XX,XXX lot in just first a got quarter, momentum. right? did

brand increased up. identity, search are got terms You

call off So, impressive, was can of you clear, XQ in the but of – be talk guidance about add it seems why why be balance the a year? expectations, which to leveling for gross to the implied

Tricia Plouf

that a in growth excited really how Yes, mentioned Jon, the can in we aggressive and have ahead the pet ourselves level year, at return of deployment that while the particularly to through I about about at or overly point, capital rates hitting lot mean, of I flow get good level briefly, of confidence and this of also that our don't sustaining far overall, outlook. and quarter too we the internal we're want

comfortable with time. is at area we're an So, this this

Jon Block

versus A the again, you the subscription below fell last and adds, some of me, Okay. worsened to the it specific in gross have the but like express that on sometimes been business. expectations And responsible under compare one deployment curtailed environment for lot for to express accelerations, notably also mentioned, to but the shareholder year-over-year, imply And last things it at And fair, three claims. pricing is and seem sort looking a be of around would covet the our might it XXXX. letter, to quarters to accelerated quarter.

seems a better line big when not to of little so massive ramp X.X% think end it just about the when at able counterintuitive. every express, seems, that top a price the deployment And obviously on trying the kind to bps bit weren't sort of we XXX is you Why matter day, accelerated? with of to swing And EBITDA. ARPU factor

Tricia Plouf

working to obviously about and retention. is, well. put quickly and can you deploy than That's to guidance. talk one your to referrals. mention something experience, we add member more prior know can slightly, I Darryl comes throw you didn't can lead that capital our investing you The start, that as that and thing that It to in to I'll add mentioned, When I we're the current here it goal the XX.X% Yes. just strong toward. that is we our in that ARPU and question when up more pets we've that did can strong lead which in can our know extent tick

One was see increase the of prior X.X% we the there, claims experience. those more investing and the investments and quarter. processing have would strong in efficiencies that about that, to was Absent from And and within XX.X% continued progress. our

capital want within claims to we a is elevate vet are member related you software haven't did anything invoice bit What We unusual Darryl, add doing processing deploying that the the to to into expense our we're more seen experience. anything? specifically. little side

Darryl Rawlings

Yes. Go ahead, Jon.

Jon Block

and more one I quarter. there. have $XXX,XXX maybe try The quarter. it. around $X try was to think this it you costs slip number I to missed last guys development that Sorry, to, the [indiscernible] million, might It understand been think in I I exact alluded I'm

I [indiscernible]? the had correct, from excluded this excluded so PAC that's Just That's PAC? Is that from the correct.

Darryl Rawlings

growth are talks international costs those you it's letter; initiatives are – it Yes, product back to when pre-revenue. offering price different think ARPU associated the accelerated where new hitting blend read These our be made PAC. of in your we've about It'll going affected target. affected to good these question, Year-over-year distribution shareholder development and That's from and And that by the and that excluded products rates, expansion new some channels. are is I with. areas improvement more business. ARPU

a to at as veterinary operating highly pricing. less target, a we're expense. the and And to looking at sensitive efficient close we're looking it more if invoice So, the I'd year-over-year the laser-focused XX% at changes good little at be business that's

Jon Block

pets, and pet Okay. give the acquire a just subsequent don't and have free on quarter is results that excluding quarter, you if you're in you offline, what And expense. drop initiative excluded the to the a coming will at an of trying sorry, spending and then mind. today right? numerator other In that's the in now, in follow-up I subsequent rate understand], [you to So, I'm I'm my development want pet the words, sort And why I in but a reconcile comes in expense in, from the denominator?

Darryl Rawlings

we're period in our we're do we internal measuring a time return, a of when mean I monthly on Yes. basis. spending and saying – of rates it

report with on the also pets $XXX,XXX to this an enter legal I'm We distort not a return by and two a now, I’m going we for my from put doing. that of years that a if initiative Japan partner rates acquiring are of doing But number the expenses divide it to quarterly It in internal basis. of would month. I'm pets

clear investing our separately bit, separate so the shareholders long-term in very doing it So, year-over-year comparisons. we're we ramping we because without can a into being distorted – spend clear. that want viewpoint that give little to so it, it what are We we're a it up in that

Tricia Plouf

a medium on than sure product example, that than far lot make think Jon, to it is and would running. getting Frankly, The initiatives. it Yes. not getting bit of product for all they're sales a makes our little Development are ARPU because I is priced is, training of up A expand this marketing and and and owner more it filed up question team for costs good I team. sense. launch. that ready initiative, other a the and any low

those the measured encompasses as XX% return internal and to Is on P&L of the lines it P&L. of revenue rate we all be a based our of many product to pet a and have And it expenses respective that parts So on soon once launches, associate as with. the will go helpful?

Jon Block

Appreciate XXX%. Thanks it. guys.

Operator

Thank you.

come questions from Autonomous with the your Ryan line next Please Our Research. proceed with question. of Tunis

Ryan Tunis

thanks. Hi,

the last is was and ever Difficulty] lower [indiscernible] products Tricia, been. thinking And [Technical good So, Difficulty] I talking product simply inscription there seems was [Technical about plan what it's focus as here. about as on products that your

next of products, what risks. you when [indiscernible] think the this you question my is, you're are I know on guess think, out the year, that over out I just if on this new you I to balance top product, be missing to continued afraid So, push lower would introducing sheet

or how value products. folks most educating insurance put said always of How think those products that thing. cheaper is as higher kind You've potentially the at could important you count

the didn't of [end are you line]? kind afraid [Technical it? Difficulty] do what's What So, you

Darryl Rawlings

I but choppy, I your got was gist question. the connection cellphone your Ryan, of think

not question that things you and and coverage very have two is was launching XXX% of lower and a Trupanion, to how people educating have convert of better our plan do of a against with category. XX coverage, such we about we the what – would and why your has consumer confident people say think And competing We're the forward. is you is all yeah, on. educate a high-quality in I don't We're brands. to years in remains anything. corresponding a would the it marketplace. if moving build you've I that true. what there's X-year lower having You to, had focus scared had that we're strategy have One that you stance product, is, product and related the than about low learn ARPU off thing? then currently leads. ARPU, we happening We're the currently And lower for

transparent medium will those differentiated, their own. how it to in do products. as can $X.XX by be stand the present and we field, to to to value very and need brands playing will offering Trupanion. so a of on underlying with low convert medium Some level consumer targeting and dollar ARPU by a the themselves But on being low is unique proposition these the people products, that equivalent higher We want which being

as us. XX%. spend has Another smaller – for last our products We our these talked only to guardrails over presence, we nearly our our accelerating a have XX% understand allowable is of is we lifetime as these It likely test will I needs everyone deploy or acquire much able pets. high grew Ultimately, are And the to makes sense. of maintaining as to the values. three brand return internal think been grew years. XX% we mean that this kind capital about about rate to category while part revenues will think PAC not And two that

value that would is us allow value the XX%. we consumer are not leads; brand all product implies it if If Our a better that maintain We're is internal in is our in transparent which slippage. rates convert to these of be strategy way, up may some able return. guardrails there long else the to successful, a not we of would it's be of it's market. for converting XX%, underlying That we're successful, nobody This that as learning means driving the buying category, be as proposition, by do going of and the better not about great, it is that them. some would that

Ryan Tunis

again the follow-up a – moment. on just to guess reconcile it. Got – I the to growth

are. [Technical think Difficulty] But, inflate as selling asset you're said products makes sense. [Technical would guess, You that I higher I the XX%. your again Difficulty] rate is why yes, they

type to does of materially? power is just to that point, understand Difficulty] really that give improve like there try where expense really extra you what do you brand going to [Technical really the – the this could is really in and help much that that So, elasticity market

Darryl Rawlings

your is cellphone Ryan, really choppy.

try to best. to do you're think But saying… my I and read Braille going I'm So,

Ryan Tunis

guys. Sorry

Sorry.

Darryl Rawlings

right. all That's okay. That's

a our think channels, long the I other frictional best for to can offered while lower X the recommended be to much as to kind coverage to customer the saying, target? possible the you're experience of it give and gets as felt. channel. believe of No. XX% through difference every easily as knows doing a Costco. broadest of we back those over point, channels. might price They of kind the them be We proposition. But and is of the consumer identify some the And or of to veterinarian I ultimately consistently, well. lower difficult and having yes. these the costs company we products your all basis consumer XX% time between answered And consumer, job it. or that each our best one have question have value highest $XX, going I well, one And hope designed wine, into for $XX, and Think getting proposition. three they're of one case, point of hear as for was view lower are it In that $XXX. But value for but that's it have like will the coverage bottles reasonably periods

Ryan Tunis

that think, invest but I growth would you and have... how option, right? tool, not in retention did, I an cut You X% a one just extra last You off, right? follow-up. might do too, in just balance that? It and Why sales That marketing, was be could would

Darryl Rawlings

it's the on held cash We're because not of be can point peanut year, the veterinarians not the to holding and like And want value flow you sums just just as It's We're sell greater view We for our $X; that value not and Yes. as strength consumer every Right period. at with associated make is. our it understand our team want how sheet, still negative strong back. brand philosophy extra say, And we And of best proposition philosophy into today. return of our market. for to it. philosophy. rates stronger, deploy that if now, of the we the of consumers we selling where And have be best the it's a strength kind it we and our capital run lot to with is XX%. getting go can those in proposition, X%, Costco much do cheapest is butter balance their And Margi's deployed. it's okay and and want back being return for of could A will. why rates people Costco. are $X.XX. of long we the you we're

Ryan Tunis

Thanks the Understood. for answers.

Sorry [indiscernible]. for the

Operator

you. Thank

of with line with the Please Wilbur your from comes Raymond question James. next question. Elliot proceed Our

Elliot Wilbur

Thanks, good afternoon.

Second going Question in to growth is the and listener, segment historical cash reverted not, XX-day of see flow With letter, see free expansion corporate to think year, I trends relative it but first just what policy. you will flow, you quarter? about about cancellation the current I about in context know the the the just can guess we free margin time respect of within the And was we questioner. place. to question, the Appreciate shareholder long-term you to ask fact, that, balance Second if the it negative questions. but last wanted don't know is I for Darryl, continue levels say the to first sounds if to how time to line pandemic, target anything period taking to the of XX%? XX over Tricia. other like or for overall it's during saw Thanks. a I then growth still top could extended in cash of of days. want the course question

Darryl Rawlings

I'll Envy – most Do we'll in question your that plan, the of reported the answer in XX-month business. over But revenue, really. first not no, is, the our our our is, that subscription we're would five we go Well, initiatives running to lower-margin the with other is And you expect which business. I driving change over next be all tell years? in

targeting we'll So, targeting margin, XX% to going and it's a be long-term all of all a be internal rate return. XX%

that business. expect improvements five in not business. really we four years other next we're margin It's any over The is And the business BXC really segment where doing or a don't BXB.

with of We period. part do the Second to cancellation the a had had question XX-day. historically

We then XX it back the on to future. XX, COVID, moved to to it we it moved prior keeping in Just we at plan and XX.

Tricia Plouf

big as to possible free always to be striving adjusted trend flow, picture, with Yes. regards operating add cash of pets. we much would through as our And we to income as the year, deploy

that flow the that redeploy we do. desire accelerate we year. free would we cash growth, we see what to guidance of as the would through With that go that extent have But the to currently can slight is do improvements and

acquiring foundation include cash claims our we is there, experience as increased expenditures. ensuring as our improve And product and fundamental software. can our member plan XX-month that Additionally, give of around the of sort flow to, our in more we go-to-market that launches And in technology as I'll investment just building XX-month context we because automation capital well technology does free was have with acquisition within of expand services core our plan. particularly

well expect would on run quarter as to this that to of CapEx. So the that's us continue in We year. through rate important

Operator

are We will come questions with that, an There do further to participation. you. no Thank appreciate call time. this And your this end. at

disconnect great your may day. this You time. a lines Have at