Trupanion, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• 2025 was a record year with over $900,000,000 in revenue over 60 months and $518,000,000 in adjusted operating income. Ended the year with nearly 1,000,000 pets protected and over $3,500,000,000 paid in veterinary invoices.
• Ended 2025 with nearly $1,000,000,000 in subscription revenue and 15% annual subscription adjusted operating margin. Operating income of $152,000,000 funded $83,000,000 in pet acquisition and investments.
• Adjusted operating income increased 33% year on year, driven by pricing alignment, improved per-pet margins and lifetime value, and steady retention. Trailing twelve-month retention improved every quarter, and new pet acquisition gross ads accelerated, ending Q4 up 8% YOY.
• Intentionally leaned into new pet acquisition with a blended Q4 2025 IRR of 23% and full-year blended IRR of 30%.
• Plan to continue investing in market reach, educating pet parents, redefining messaging, and rolling out product enhancements. Veterinary channel and Territory Partner model play critical roles. Growing awareness of pet medical insurance leads to focus on reaching pet parents earlier.
• Commitment to mission: helping ensure pets receive needed care so veterinarians can practice.

Segment Performance:

• Subscription Business: Revenue was $261,400,000, up 15% year over year. Adjusted operating income was $43,100,000, an increase of 23% from the prior year and contributed 96% of total adjusted operating income (AOI) for the quarter. Subscription adjusted operating margin was 16.5%, up from 15.3% in the prior year. Total subscription pets increased 5% year over year to over 1,096,000 pets as of December 31, including ~63,000 in Europe.
• Other Business: Revenue was $115,400,000 for the quarter, an increase of 5% year over year. Adjusted operating income for this segment was $1,900,000, or 1.6% of revenue. Growth for this segment is expected to continue to decelerate as they are no longer enrolling new in the majority of U.S. states for their largest partner.

Guidance:

• For full year 2026, total revenue expected in the range of $1,550,000,000 to $1,582,000,000. Subscription revenue expected between $1,117,000,000 and $1,137,000,000 (~14% YOY growth at midpoint). Total adjusted operating income expected in the range of $173,000,000 to $187,000,000 (~19% YOY growth at midpoint) assuming veterinary inflation in line with current trends.
• For first quarter 2026, total revenue expected in the range of $376,000,000 to $382,000,000. Subscription revenue expected between $265,000,000 to $268,000,000 (~14% YOY growth at midpoint). Total adjusted operating income expected in the range of $38,000,000 to $41,000,000 (~27% growth YOY at midpoint). Revenue projections subject to conversion movements between U.S. and Canadian currencies, using 73% conversion rate in projections.

Risks:

• Risks associated with forward-looking statements, including known and unknown risks that could cause actual results to differ materially, such as veterinary industry inflation, conversion movements between currencies, and uncertainties in pet parent behavior and market conditions.

Q: John Barnidge from Piper Sandler asked about brand spend successes and acceleration.

A: Margaret Tooth responded that brand spend is focused in vet space and expanding to where pet parents go prior to vet, seeing quicker conversion through the funnel and encouraging results with gross pet ads up 8% and net pet growth 50% in Q4.

Q: Brandon Vazquez from William Blair asked about 2026 guidance and price vs volume.

A: Fawwad Qureshi said pricing to play larger role in 2026 but lower than 2025, pet count contribution higher, loss ratio assumptions carried forward, expense management showing leverage with expense down in Q3 and Q4, and efficiencies expected to continue.

Q: Josh Shanker from Bank of America asked about retention cohorts and Landspath.

A: Margaret Tooth said retention across cohorts improving, middle bucket (under 20% rate increases) improving, over 20% bucket also improving, and first year cohort has opportunity. Fawwad Qureshi talked about Landspath being early stage, unit economics favorable, technology investments driving margin expansion, and financial investments like paying down debt as good uses of cash.

Q: Jonathan Block's representative asked about lower-priced plan and IRR.

A: Margaret Tooth said they are broadening the existing Trupanion offering and working on a new product, and IRR is affected by margin assumptions and blended metric, with investment starting to pay off as lifetime value of pet increased 35% YOY.

Q: Wilma Jackson Burdis from Raymond James asked about other revenue runoff and veterinary price inflation.

A: Fawwad Qureshi said other revenue runoff is trending down but not significant, and no change in inflation assumptions yet as they monitor it closely.