Trupanion at William Blair Conference: Strategic Growth Insights

On Tuesday, 03 June 2025, Trupanion Inc (NASDAQ:TRUP) presented its growth strategy at the 45th Annual William Blair Growth Stock Conference. CEO Margie Tooth outlined the company’s robust mission to support pet owners, while addressing challenges such as margin compression from rising veterinary costs. The call highlighted Trupanion’s unique business model and strategic initiatives for expansion in North America and Europe.

Key Takeaways

• Trupanion’s cost-plus model and direct vet payments contribute to high retention rates.
• Less than 4% of pets in North America are insured, indicating a significant growth opportunity.
• Trupanion is expanding into Europe and considering entering the pet food market.
• The company maintains a 37% internal rate of return despite recent margin pressures.
• Veterinarian recommendations are a key source of leads, enhancing Trupanion’s competitive edge.

Financial Results

Trupanion reported healthy growth in subscription revenue, with a focus on returning to a 15% adjusted operating margin. Recent veterinary cost inflation compressed margins, but the company is actively adjusting rates to recover. The internal rate of return remains strong at 37%, reflecting disciplined reinvestment. The estimated profit per pet, which had decreased to $6, is now on the rise, with a target of restoring it to a healthy level. The lifetime value of a pet is projected at $528 when optimal margins and retention rates are achieved.

Operational Updates

Trupanion continues to penetrate the underinsured North American market, with less than 4% of pets currently insured. The company has expanded into Germany, Switzerland, and acquired Pet Expert in the Czech Republic, Slovakia, and Belgium. Trupanion partners with approximately 28,000 veterinary hospitals in North America, leveraging its patented software for direct vet payments. Subscription offerings are diversified through brands like Firkin and PHI Direct.

Future Outlook

Trupanion aims to drive growth by increasing leads, improving conversion rates, and expanding subscription offerings. The company is considering entering the pet food market to diversify revenue and enhance customer retention. International expansion will continue, with a focus on leveraging existing European operations. Trupanion targets a 25% market penetration rate, akin to the UK, and may increase acquisition investments if aligned with its 30%-40% IRR framework.

Q&A Highlights

The "puppy boom" during COVID-19 led to rapid growth, followed by margin compression due to rising veterinary costs. Trupanion’s pricing and investment strategies have adapted accordingly. Veterinarian recommendations remain a crucial lead source, supported by Trupanion’s product design and strong relationships with territory partners. The company’s strategy of acquiring leads through vets, rather than direct-to-consumer spending, allows for disciplined growth within its IRR guardrails.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Brandon Vasquez, Research Analyst, William Blair: Okay. Good afternoon, everyone. Thanks thanks for joining us here. My name is Brandon Vasquez. For those of you who haven’t met, I’m the research analyst at William Blair that covers Trupanion.

And I’m required to inform you that you can go to our website at williamblair.com for a complete list of disclosures and potential conflicts of interest. With that, I’m happy to have Margie Tooth with us from Trupanion, the CEO. She’s going to run us through a corporate presentation. If we have time, we’ll do some questions. If not, after the breakout session, we’ll get into a

Margie Tooth, CEO, Trupanion: little more detail. So with that, I’ll hand it over to Margie. Thank you very much. Hello, everybody. Happy to be here today to talk to you this afternoon.

As Brenna mentioned, got some slides that we’ll walk through, and I’ll try not to gallop through them too quickly, and hopefully, we’ll have time for some questions, but there is a breakout following. So if you can’t get your question answered today in this session, then we’ll hopefully do it afterwards. So I’ve been part of the team there for over thirteen years. We’re based in Seattle. We’re 25 old as an inch pet insurance company, Canadian founded, and we provide coverage for over a million pets across North American market and just moved into European spaces.

So let me see if I can get this into work. More disclosures for everybody. So first and foremost, we are a growth company. So as Trupanion, you know, this is obviously an industry that is large and under penetrated in pet insurance. Less than 4% of pets across the North American market have pet insurance.

I’ll cover more details on this later on in terms of what that means in terms of the overall opportunity in front of us. The economics of our business are a cost plus model with compounding monthly recurring cash flow. You can read all of the words on the screen, so I’m not going to read them out for you. But we have moats, we’ve got deep moats we’ve been working on, and I’ll give you a sample of what those most look like. Our financials is a monthly subscription revenue model.

We have strong returns invested capital. So our overall program is that we make money from the pets that we enroll, and we reinvest that to grow the business. And as a position, we are industry leading in terms of retention, in terms of our overall sustainable cost model, and we are the most consistent and sustainable in terms of revenue growth. And we’ve been doing this for a little bit of time now. So that’s Trupanion in a nutshell, but let’s go into a little bit of detail.

So our mission, we exist to help loving responsible pet parents budget and care for their pets. So no one knows when they get a pet if they’re gonna have a lucky or an unlucky pet. No one knows what the potential costs can run into, but today it’s significantly higher than it used to be. So there’s more of a need for someone to be protecting their pet and helping their pet than they used to be. And when we think about lucky and unlucky pet, our job is effectively to eliminate the uncertainty as with any insurance company to make sure that we are priced appropriately to be able to provide a support to your pet parent for the life of the pet.

And as you can see here, we target 71¢ in the dollar and the average pet is right in the middle. Some people end up getting a much on much more unlucky pet than others and some have a very lucky pet. Let me give you an example of one of our members is very sad looking beagle, six year old Sadie. I’m not going to read out all of the words on the screen here, but this is a this is something that comes into us every single day. The pet parents that we help and the way that we help and as you can see in the middle of the screen without Trupanion, we know we wouldn’t have our precious girl.

This is the this is the mission driven company that we are, and we’re supporting more people because we can help at the time of checkout by paying directly. That makes a massive difference when you have invoices as this pet would have experienced in the in the tens of thousands of dollars. So why Trupanion? This is not supposed to all come on the screen all at once, so forgive me, you’re gonna have to bear with me as I walk through this. It’s not going to stagger on.

If we saw on the left hand side, we’ve got the broadest coverage in the industry. And what that means in real terms is we have comprehensive lifelong coverage if a pet becomes sick or injured. And that’s effectively showing up in two ways in our product. The first is we have a lifetime deductible and that lifetime deductible is set up per condition. So if your pet becomes sick or injured with diabetes or a chronic condition in year one, once that deductible is met, that’s met for the life of the pet.

So you’re going to see that continue, that retention rate is really strong because of that broad coverage that holds on to that pet for life. So we have strong retention rates as a result of that. Then we have our lifetime pricing, which I’ll come on in the best value, but these are components of our product base that really allow us to give the broadest coverage. So we price for complete coverage. We do not have a network of care.

So you can take your pet to any vet across North America and we will provide the same level of care. And more importantly, we were the first provider in the industry to cover the things most likely to go wrong with your pet. So we cover congenital and hereditary conditions. So if you have a pet like I have an English Bulldog, I should know better, but I have an English Bulldog. They are notorious for having all kinds of conditions and everything that will hopefully doesn’t go wrong with her would be covered by Trepanion.

So we bake that into the coverage that we have to ensure that it’s complete and broad because that’s essentially why you have insurance to cover the things that are going to go wrong. So the best value. Now value can mean a lot of different things to many people, but the way we built the product is to create a product that will be 71¢ on the dollar for every pet parent. So we have 1,200,000 pricing categories across our book of business designed to carve out by species, by breed, by age, and by geography. And so our goal is to make sure that whichever cohort you are in, you are getting the same value proposition as the next person.

That is the highest sustainable value proposition in the category today. We don’t have birthday pricing which is the first bullet point in the middle there. And this goes back to the lifelong approach that I mentioned beforehand. So what birthday pricing is, is every time your pet has a birthday, providers increase the rate guaranteed because they know that pet’s gonna have specific issues. So initially, what will happen with Trupanion, if you run a quote today, you’d probably see Trupanion might be a little bit higher in terms of the cost.

But we bake in the age enrollment and we lock it in at eight at the age enroll. Which means that some by the time your pet’s five or six years old, competitors prices will be significantly higher than Trupanion’s. And we do that deliberately because we’re designing our product to be there for the life of the pet. That makes a massive difference when it comes to retention, because when you need us most, we’re not going to increase your rates above above norm. That does not mean we don’t increase rates.

We’ve been through a very big cycle of rate increases as margins have compressed, but that’s not related specifically to age. We have no payout limits. So we think about a product, you think about the capping, a few years ago this probably didn’t seem quite as much of a sales piece as it does today. The cost of care, I don’t know how many people have been to the vet recently, but you’ll notice there has been significant increase in cost of care. Bills can run easily into the tens of thousands of dollars and not having that parent limit allows the pet parent to say yes to the best form of treatment and not having to go for a second or third option.

And then on the far right hand side, our customer service. Our member experience, we pride ourselves on being a member first, member based approach. So everything we do comes through the lens of the member and the veterinary industry. So what we mean here is how do we help solve the biggest problem? The biggest problem is a friction of having to pay upfront and be reimbursed by to the vet.

So we created a patented process with our software which allows us to pay the vet directly at the time of checkout, the same way as any of you go to the dentist. It’s completely frictionless. We integrate with the software and allows us to pay and just leave the pet parent leaving the pain for that portion of the bill. That’s a massive reduction of friction between the care for the pet and also the lifetime of the pet. Twenty fourseven customer service, we’re the only provider across the world to offer a contact center 20 so if you are in the vet in the middle of the night because pets do not get sick at convenient times, you can call us and we’ll be there to help you and we’ll be on the phone for pre approval for things when people really need you.

In times of brand advocacy, this is a really key part of our value proposition because people need to know there’s someone on phone to speak to when push comes to shove. And then finally, have on the ground support, which is significant for us. It means that we partner directly with veterinary hospitals across the North American, twenty eight thousand North American hospitals. We have boots on the ground that can help us in real time understand if our product is doing what we think it should be doing, if the member experience is what it should be doing, and if we’re solving the problem we set out to solve. So imagine this is like a constant focus group for us, constant feedback.

Which takes me to the defensible moats. So the relationships we have through our territory partners are the things that make us nimble, allow us to adjust, and make sure that we’re living up to our value proposition, which again feeds into that retention rate. And that helps drive lifetime value. We have the superior value proposition, which is built on not only the relationships and continuing to adjust our product, but also the data that we get that allows us to price quicker and more effectively than others in the industry. The integration that we have both through the relationships and through our patented software, if I jump to the right hand side there, gives us a lot of real time insight into how we should be pricing, behavior changes and cost changes, which is insight that other people do not have.

So let’s move on to the underpenetrated markets, the markets we operate in. These are all the global industries in front in front of you on the screen that currently have pet insurance in some form. And the North American market you can see is just 4% penetrated. There’s around a 80,000,000 cats and dogs in this market and we’ve been around since the very late 70s early 80s and that retention that that penetration rate has started to tip up nicely over the last few years. So I’m going to take you through again if bear with me if this was flashing on one by one it wouldn’t be quite such an assault on you, but if you just don’t read down, don’t cheat.

If we start at the top, there’s 180,000,000 cats and dogs in the North American market. Around a 20 visit the veterinarian every year. So then the market we’re talking to, we’re talking to the people who actually do use that product, they listen to their vet, they listen to their recommended treatment plan, and people who want to go and get the wellness visits and dental checks and vaccinations. Of those 20,000,000, we see around 14,000,000 new puppies and kittens born into just the North American market every year, which is around 1,100,000 new pet leads. We would consider them our leads, our opportunities to enroll every single month.

So the market is colossal. And despite the COVID boom, and we did see eventually, we did see a COVID boom in puppies and kittens, that’s now gone back to normal. We’re still seeing a huge amount of pets, so they’re not getting insurance today. Massive opportunity. So then if we make that into a real line, how do you go after 1,100,000 pets?

Well, this is how. There’s around 28,000 veterinary hospitals in North America that we interact with every every week, either usually through our territory partners, the through our contact center, our account management teams, and through our distribution. So we’re having constant conversations with this 28,000 vet hospitals. Now there are more than 28,000 vet hospitals in the North American market, but many of them have large animal and are not necessarily practicing on the pets that we’re looking to work with. And so if you divide that number just very crudely, you’ve got around 40 new puppies and kittens per month per hospital.

Now of course you’ve got some that are bigger than others, but broadly speaking, when you break down the huge opportunity and you think about the per hospital activity, we’re not asking for a huge amount of activity per hospital. And you can see how it’s we can go into this by having territory partners who can partner directly with the hospital to help them educate on the benefits of having insured clients. So just in North America alone, the category has grown on average 23% over the last few years. You can see we’re starting to really ramp up as a category. The last three years, there’s been significant margin compression, which has held back a lot of the investment that we were seeing in the middle of the kind of COVID boom.

But you can see the massive opportunity is growing at $1,000,000,000 plus in a category that potentially could get to the same size as the European markets, which are on here. So not only are we in North America, I mentioned earlier, we’re also now starting to enter into European spaces. So we launched the Trupanion brand in Germany and Switzerland in August of last year. This was after a purchase of a very small company in the German market, gave us license into Europe to allow us to start to operate with the same standard of coverage that we have today in North America. We see an opportunity to pay the vet directly, to offer lifelong coverage, comprehensive coverage into market that you can see is equally as underpenetrated.

In Slovakia, Czech Republic and Belgium, we purchased a different company called Pet Expert in 2022 And this company is also going to be rebranded to Japan in the next few years as we start to kind of really find our footing in those markets. So tremendous opportunity. There’s around 40,000,000 pet parents in these markets that we’re looking to target. So you add that to the market we have again, addressable market looking at building on the same store sales, some big hospital numbers and some big pet parents. So this is our brand list, the brands that we are most closely aligned to.

We do provide support for other brands, but these ones are owned directly by Trupanion, so from end to end. The core Trupanion brand is our core product. It’s one that we started in Canada. It’s the bulk of our business and it’s where most of our revenue comes from and our high retention rates. This is a product that’s predominantly distributed through the vet channel, also through breeders and members referring their friends.

Then we have Firkin and PHI Direct. These are two brands we launched into the Canadian market. They’re as yet to come out of Canada, but they will do over the next couple of years. And these products are designed very specifically to speak to a different type of pet parent. So when you think about the market as we move into more adoption, we’re seeing a different need from a different category of pet parents.

So they might not want the bee’s knees were product, they might want something that’s cheap and cheerful, they might need an entry level product. And that’s what we get now have with these three tiers. And then the final product on there is Pet Expert. This is the brand that we have in Czech Republic, Slovakia, and Belgium. And that one will be changing over time.

Currently, we have it by Trupanion, branded specifically to Align because it does pay the vet directly. So when we think about our point of difference, pet expert also has that within it okay then this is this is a chart that we pulled from the latest shareholder letter which came out about six weeks ago and this is a really important point Spoken to many of you in the room today about where are we in our journey. And you can see that in terms of the model as we see it from if we take a diffusion of innovation, you can see that if we were to get to 25%, which is where The UK market is at, it’s a category that I was working in for eight years before I came to The US, I see no reason why we couldn’t get there. So if we just assume that 25% penetration, today we are just about in that early majority phase. It’s taking us a very long time as a category to get there.

And as we start to see more adoption, which we’re seeing with increased dollars being invested into the category, good competitors coming into the space who are pricing their products appropriately, are giving people a good experience, we’re seeing an increase in vet costs, is driving high demand for our products and services. We’re seeing that movement into the early majority and we are on the cusp of hopefully seeing that big inflection point. And we see that directly within the Trupanion walls and we have more hospitals raising their hand today. We had a record install rate in April for our software because people need to have that that solution today. So it’s an exciting time for the category.

This, those of you that have followed us for a long time will recognize this chart, so kind of subscription revenue, it sort of speaks for itself, goes up into the right. We’ve seen nice healthy growth from our book of business that we continue with a very strong retention rate to hold on to. To reiterate that retention rate, here are the cohorts by year and you can see that of the of the pet and that’s our goal. So you know, though we were very small company in 2010, but you can see how we all the way through to today. And that’s through having the ability to get care for that pet when they need it with with in timely fashion.

So this is not such a nice chart, although it’s now looking a lot better than it did. So you can see from 2014, as we were really starting out, we were working through our pricing with a target in mind of getting to a 15% adjusted operating margin. In 2022, as you’ll note, we saw significant inflation in the industry. Now typically, the vet industry will raise our prices somewhere between 6% to 7% a year, And that was fairly consistent for us. We saw that we recommend recognize that every single quarter in Q1 of every year.

In 2022, prices went up 6% in Q1, and they continued to go up through the year. So by the end of the year, we saw a 12% inflation. In 2023, that inflation went to 15%. In 2024, it went to 15% and by the end of year, we’re seeing 50 around 15%. So we’ve had massive inflation that took us the best part of two and a half years to pull back through the inflationary period to ensure we’re pricing appropriately to manage the costs that we’re seeing coming in.

So it’s a cost plus model. If we don’t get our pricing right, you can see our margin gets cut. It was actually cut in half in one of our quarters. So as you think about how we then have to pivot, we go to the regulator, we filed our rates, we got very good at filing a lot of rate very quickly, we went quicker than anyone else in the market, which has allowed us to see that nice recovery at the end of twenty twenty four and we expect to see that consistency return, which allows us to get back on track to that 15% margin. So all that being said, it’s been a journey and it’s been one that in that inflection point down, we were not heavily investing in growth during that period.

So for Trupanion, we reinvest our adjusted operating income to grow the business. When we knew we were not priced appropriately for a majority of our new pets, we did not want to double down and grow the business at a time when we knew we’d have to give those people very high rate increases. As a result of that, we held back our investment and now we’re just starting to build that back up again. Instead, we focused on retention and we’re seeing some really good early signs of testing from the retention results, which have far exceeded our expectations. I will not walk you through this whole chart, you’ll be pleased to know, but I do just want to point out a couple of things when we think about the the business and how we reinvest our income.

There are two things that are so important to us as a business and we think about investment. First of all, what is the profit we’re making per pet? If that profit goes down, you can see that number, if I can point properly in here. Oops, now I’m going backwards. Well, you can see the estimated profit per pet in that third line down.

That being $8 that was at $1.6 So it went down to $6 is now going up. We’re using a three year look back here, which is important. It’s not twelve month look back. So we need to get that profit to a healthy level. And then you’ll see that we multiply that by the number of months we retain a pet.

So we currently are retaining pets in 2024 at least, so sixty four point nine months, which once you get people beyond that first year, that’s effectively the life of that pet, but you have to get them beyond that first year. That number is now moving back in the direction it used to be and I expect over the next several years, we’ll get that back on track to the ninety eight point six percent, ’90 ’8 point ’7 percent levels. But you can see the lifetime value of a pet of $528 when we have got the margin coming through that we need and we have the retention rate. So for Trupanion, the big focus has been for the last six months, just make sure that pricing is right and make sure the member understands it before we push hard to acquisition. What this does do though is it shows you we have significant discipline in how we are reinvesting those dollars.

And despite margin compression, despite pulling back, we were still able to grow the business and have a 37% internal rate of return based on a three year look back at margins. So it’s somewhat conservative, given that we know the pets from rolling today have a much higher margin. So I’m going to leave on this slide and hopefully we’ve got some time for questions as well. But just to think about the future and the opportunity, we’ve talked about the fact there are 28,000 hospitals, 40 pets per hospital that are going in every single month that we can speak to. So we have a number of growth levers that we’re continuing to build within Trupanion.

The first and foremost is getting more leads, speaking to more of those puppies and kittens as they enter practice management systems, and having discussions around why insurance and why Trupanion. Then we increase the conversion rate, which has been a it’s a never ending story as we continue to try and lean into why Trupanion. Our phone conversion rate has never been higher than it is today. And we are seeing some gap closing on a web conversion rate to be able to drive that high volume. That comes in tandem with number of stores across North America.

So how many hospitals are introducing the concept of medical insurance? And then talking about how do we get that to be habitual, how do we have more stores, more hospitals referring patients to Trupanion. We have different subscription offerings, so more coverage. We’ve got a low add ons we can give to our coverage, we’ve got less coverage with PHI and Firkin, they’re speaking to a different population, but allow us to help the penetration rate move forward and different channels. So we introduced Chewy as a partner a few years ago, we work with Aflac as a worksite benefits provider and we have a number of different channels through those avenues that we didn’t have access to before.

So not only have we got vets, breeders, shelters, members referring their friends, we’re now looking at trying to drive different distribution channels that allow us to get access to more pet parents. Then we have the ability that we have as a business to retain our members and articulate the monthly subscription revenue model. We have access to data and things that give us a competitive advantage that we believe we can start to add different product lines. So for example, this particular box is calling out pet food. So pet food is something that we’ve been looking to advance into over the last few years.

And we’re getting to the point where we believe that over the next two to three years, we’ll have an opportunity within pet food that not only give us additional margin, but it also gives us a lot of diversification in terms of how do we take the money from the pet food to help reinvest in growth of insurance, while also getting a larger share of wallet from a pet parent. We also believe that with pet food, we can help retention because if we know that someone feeding our food has got a healthier pet and the risk comes down, we’ll pass that back on to the pet parent in the form of a discount, which helps drive overall retention rate and lifetime value. And then lastly on the slide, we’ve got the international markets. There’s around 40,000 hospitals in the areas we’re already actively in. Now we’re not pushing aggressively in those spaces from an investment perspective, but we have the opportunity to do so over the next few years as we bring them up to scale.

We’re gradually introducing our pet acquisition dollars, but we’ll continue to do so within that framework of the internal rate of return of 30% to 40%. So all that being said, huge growth opportunity, massive addressable market. We are currently the leader in terms of the way that we retain our members and the way we work with veterinary providers. We provide a solution to a problem that’s got bigger than ever before as the cost of care goes up. Just leave you with a point in mind, just for North America alone, every point of penetration, and we’re under 5%, is worth $1,300,000,000.

And we think we have a massive opportunity that we’re ready to take. So with that, I’ll pass over to Brennan. Perfect. Questions?

Brandon Vasquez, Research Analyst, William Blair: All right. I’ll throw us maybe I’ll ask one or two high level questions here before we go to the breakout, and we’ll get a little more specific. Margie, think for people here who may be newer to the story, what might be helpful is, you’re kind of alluding to this in different parts of the slides, but talk to us about the period of the puppy boom, what happened after that subsequent to that, and then what kind of actions you need to be taking to kind of right size your not right size the organization, but readjust to get back to your operating metrics that you guys are looking for? And where are you today, right? So I think a lot of people are going to pull up stock chart, look at the a little bit of a ride.

So help level set everybody where we are today on that ride.

Margie Tooth, CEO, Trupanion: Yes. So the puppy boom, everybody was talking about a puppy boom in early twenty twenty. And puppies don’t just get produced by a manufacturing plant, so they will have to be born. They did. They were born.

And puppies and kittens were born in plenty. And we saw at the end of twenty twenty and 2021 a real swell of leads coming into the business. So people taking care of their pets as they wanted to, as they had nothing else to do. I mean, they they take care of the pets anyway, but they were literally constantly around them. So the entire category grew quickly in that period.

We focused initially on retention because that’s what we could control, and then we leaned into acquisition, and you’ll see a nice sharp growth curve from 20 to 2022. What then happened after the puppies start to ease off, you don’t see as many pets coming through the market, still over a million in any given month. We started to see those margins shift. So vet hospitals were seeing a huge demand. All those of you that go to the vet will probably remember lines around the block, you can’t get an appointment for several months without booking in advance.

As vets saw that, they also were losing their team members because of the strain on them as an industry and we saw the cost to have employed vet techs, front desk staff, doctors, surgeons, specialists all went up. The vets were struggling to keep hold of their people because of burnout. So we then saw the the surge of inflation come through in 2022 directly as a result of that labor cost. That started to I mean, it’s it’s still higher than it used to be. I think we are probably towards the tail end of vets being comfortable.

They had to charge more. They were under charging as it was. And I think now they’ve taken sufficient pricing action to really kind of put themselves in a better position as an industry and attracting more talent as an industry. But I think, you know, now we’re at the tail end of understanding where have they pushed they pushed to the right level at this point is normalizing. So think we’re through the worst of it for sure.

The main thing as an insurance company is consistency. If we see rate trend coming through in a consistent manner, we can price that. We take the regulators, they can see that trend. It’s when it moves around very in a very volatile fashion, it’s very hard to get that consistent value proposition, which we know is what’s critical for members to be able to budget for.

Brandon Vasquez, Research Analyst, William Blair: Okay. And one of the parts of this story that I’ve always thought is very interesting compared especially to competitors is in any given period, most of your leads are coming from the veterinarians. We’ve done survey work around this. You guys disclosed many of the numbers, and by far they are recommending you. Talk to us a little bit why they’re recommending you and how durable of kind of a competitive moat that is specifically for you guys.

Margie Tooth, CEO, Trupanion: Yeah, I think when we first started, the idea behind the product was to create a product that would allow a vet to treat a pet the way that they’re trained to treat them. And vets are not trained in vet school to give option a, b, c, d. They’re trained to treat that pet with best medicine. And best medicine to one vet will be very different to another. It’s not our job to dictate that care.

It’s our job to understand how much does it cost to take that take care of that pet and then price appropriately. So the vets understand that. And the territory partners are a significant moat to the business where they are going out every day and visiting the 28,000 hospital visit them all in one day, but 28,000 hospitals, and they build a relationship. They can look people in the eye, and they get trust from people, and they tell people we will do what we say, and that is in insurance a big deal. So from that perspective, not only do they see the the relationship and the trust and do we react to what they give us in terms of feedback, the product is designed to support them as a practitioner.

And we continuously see vets are choosing Trupanion for themselves. We don’t give them a discount. They have the Trupanion product because they know it’s a good product. And when someone asks the veterinarian, well, who are you insured with? And they said Trupanion.

That’s the endorsement you need. So it’s it’s having a good product, showing that we do what we say, and and aligning to the interest of the industry to help those pets get the care they need. And they know with Schupanion that they see a client coming in time and time again because we don’t put barriers to entry in front of our product.

Brandon Vasquez, Research Analyst, William Blair: What does it mean from a commercial and a P and L perspective, especially when you compare the commercial strategy of your guys is getting leads from vets versus maybe more of the heavy DTC spend. How does that help you guys scale this business a little more durably than maybe some of the others might?

Margie Tooth, CEO, Trupanion: Yes. Well, mean, we’re always looking at internal rate of return. When you’ve a territory partner walking in the door and generating leads, we don’t pay for that until we get an enrollment. So first and foremost, that’s expensive in enrollment side. It’s not from a lead generation perspective.

The benefit that we get is we have the conversation of the vet. What we then need to do effectively, and this comes down to execution, is pull that person through from the vet conversation to actually enroll with Trupanion. And that’s where we spend a lot of our dollars. So when we think about our total pet acquisition costs, the adjusted operating income that we’re redeploying, we’ve got a lead portion, we have an acquisition, a conversion portion, and then we have a keep portion. And that keep is that first year retention.

So from an economic perspective, we’re far more efficient from a lead generating point of view. And in some areas, we’re more efficient from a conversion perspective. And then keep is something that we add on as we need to, to support that first year retention. So we’re a lot more efficient. It also means that because we’re operating within the 30% to 40% guardrail, we will not enroll a pet if it’s going to be falling outside of that.

So we are very disciplined. So we’re not looking at growing rapidly, we’re looking at growing judiciously and being very thoughtful around what journey we’re to give. Now I think in the next six to twelve months, we might get a little bit more aggressive with our acquisition investment, but we’re not going to do it unless we know we can get good returns. And having that adherence, those internal rates of return mean that we don’t we’re not competing with our competitors in some of the spaces that cost a lot more to operate in.

Brandon Vasquez, Research Analyst, William Blair: Okay. Great. Well, let’s we’re going to go to the breakout room in Jennie A, and we’ll go into a little bit

Margie Tooth, CEO, Trupanion: more detail. Thanks, everyone.

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