Trupanion, Inc. Q3 FY2025 earnings call

• Third quarter financial performance was strong with continued momentum across key business metrics. Subscription segment accelerated net pet adds for the third consecutive quarter, up 45% year-over-year, and delivered record subscription adjusted operating income of $39 million, with a 15.5% adjusted operating margin. - Progress in retention with targeted communications and enhanced member support contributing to improved member loyalty and trailing 12-month retention. - Returned to growth in gross pet additions, up 4% year-over-year, leading to the highest net pet growth in 7 quarters. - Deploying capital aggressively to strengthen the Trupanion brand through partnerships like with the Seattle Reign FC and BMO Insurance, focusing on engaging pet parents and broadening reach.

The subscription segment had revenue of $252.7 million, up 15% year-over-year. Total subscription pets increased 5% year-over-year to over 1,082,000 pets as of September 30, including approximately 60,000 pets in Europe. Subscription adjusted operating income was $39.1 million, an increase of 27% from the prior year, with a subscription adjusted operating margin of 15.5%. The other business segment had revenue of $114.2 million for the quarter, up 5% year-over-year, and adjusted operating income of $1.8 million or 1.5% of revenue.

• For full year 2025, total revenue is expected in the range of $1.433 billion to $1.439 billion. Subscription revenue is expected between $986 million and $989 million. Total adjusted operating income is expected in the range of $148 million to $151 million. - For the fourth quarter of 2025, total revenue is expected to be in the range of $371 million to $377 million. Subscription revenue is expected to be in the range of $258 million to $261 million. Total adjusted operating income is expected to be in the range of $41 million to $44 million.

• Risks related to market uncertainties and unknown risks that could cause actual results to differ materially from forward-looking statements. - Currency conversion rate movements predominantly between the U.S. and Canadian currencies affecting revenue projections. - Potential impacts of economic conditions on pet parents' ability to afford veterinary services, which could impact sales.

Q: Congrats on a nice quarter here. First, talk about high-level picture and commercial strategy going into next year.

A: We're pleased with the quarter, have third consecutive quarter of net pet growth. Strategy has focused on margin setting, retention, and now reaccelerating pet growth. Moving into offense position with strong financial position to invest aggressively.

Q: On growth dynamics between European subscription pet cohort vs U.S./North America and growth rates going into new year.

A: Majority investment has been in core Trupanion subscription business. European business has limited investment now, but margins allow for future investment.

Q: Clarify Trupanion products offered via BMO Insurance partnership and contribution to pet base next year.

A: Core Trupanion product will be offered, but contribution not expected in short to midterm as partnerships take time to build.

Q: Thinking about pricing going into 2026, are we still on track for 15% inflation?

A: Inflation in quarter was in line with Q2. Too early to predict 2026, but cost of goods in market will dictate pricing, and we'll monitor to maintain value proposition.

Q: Thoughts on current environment impacting sales with consumer pressure.

A: Pleased with quarter's gross adds, pet parents understand need for insurance, and we continue to articulate value proposition with investment in funnel.

Q: Interest rate savings and onetime items with new credit facility.

A: New PNC credit facility has interest savings of about 240 basis points, expected to result in $8M - $9M in interest savings.

Q: Potential additions with fourth quarter open enrollment for group channel.

A: Anticipate no meaningful contribution from Aflac in quarter as it's a nascent channel with ongoing refinement.