Quarterly Earnings Supplement Q1 2025 Total Subscription Revenue Growth $3.1 $4.4 $5.3 $6.3 $7.6 $8.8 $9.9 $10.7 $12.0 $13.2 $14.5 $15.7 $17.0 $18.4 $20.0 $21.4 $22.9 $24.9 $27.1 $28.6 $30.1 $32.2 $34.4 $36.7 $39.1 $42.2 $44.6 $47.4 $50.2 $52.6 $56.5 $59.0 $61.5 $63.9 $67.4 $70.9 $74.2 $77.7 $82.6 $86.6 $89.5 $92.5 $99.4 $106.4 $113.3 $120.4 $127.1 $134.1 $139.8 $145.8 $152.4 $158.6 $165.2 $173.3 $182.9 $191.5 $201.1 $208.6 $219.0 $227.8 $233.1 $0 $50.0 $100.0 $150.0 $200.0 $250.0 ($ in millions) Revenue fr ...

Core Insights - Trupanion is hosting a webinar on H5N1 bird flu, focusing on its impact on pets and the veterinary community [1][2] - The webinar aims to provide veterinary professionals and pet parents with the latest information and practical guidance on avian flu in pets [2][3] Company Overview - Trupanion is a leading provider of medical insurance for pets, with over 1,000,000 pets enrolled across the United States, Canada, Europe, and Australia [7] - The company offers unlimited payouts for the life of pets and has a patented process that allows for direct payment to veterinarians at checkout [7] Webinar Details - The webinar titled "Bird Flu: What We Know Now" will be available on-demand on May 8th, 2025, and is hosted by Dr. Steve Weinrauch, Chief Veterinary/Product Officer at Trupanion [2] - Panelists include experts from various veterinary and public health organizations, discussing topics such as at-risk pet populations, virus transmission, clinical signs in pets, and preventative measures [6] Health Monitoring System - Trupanion's Pet & Public Health Early Warning Detection System uses real-time health data from over 11,000 veterinary hospitals to identify illness trends affecting companion animals [4] - The system collaborates with health authorities to proactively detect and respond to potential health threats [4]

Group 1 - Trupanion (TRUP) closed at $36.44, with a 4.1% gain over the past four weeks, and a mean price target of $54.75 indicating a 50.3% upside potential [1] - The average price targets range from a low of $41 to a high of $65, with a standard deviation of $10.66, suggesting a variability in analyst estimates [2] - Analysts show strong agreement on Trupanion's ability to report better earnings, with a positive trend in earnings estimate revisions indicating potential upside [4][11] Group 2 - Over the last 30 days, the Zacks Consensus Estimate for Trupanion's current year earnings has increased by 64.3%, with two estimates moving higher and no negative revisions [12] - Trupanion holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] - While consensus price targets may not be reliable for predicting exact gains, they can provide a directional guide for price movement [10][13]

Core Insights - Trupanion reported revenue of $341.98 million for the quarter ended March 2025, reflecting an 11.7% increase year-over-year and a surprise of +1.17% over the Zacks Consensus Estimate of $338.01 million [1] - The company's EPS was -$0.03, an improvement from -$0.16 in the same quarter last year, with a surprise of +25.00% compared to the consensus estimate of -$0.04 [1] Revenue Breakdown - Revenue from Other Business was $108.91 million, exceeding the three-analyst average estimate of $106.10 million, representing a year-over-year change of +3.7% [4] - Subscription Business revenue reached $233.06 million, slightly above the average estimate of $231.92 million, with a year-over-year increase of +15.9% [4] Operating Income - Other business adjusted operating income (non-GAAP) was reported at $1.17 million, surpassing the average estimate of $0.83 million from three analysts [4] - Subscription adjusted operating income (non-GAAP) was $30.02 million, exceeding the average estimate of $27.50 million from three analysts [4] Stock Performance - Trupanion's shares have returned -1.8% over the past month, compared to a -0.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Company Performance - Trupanion reported a quarterly loss of $0.03 per share, better than the Zacks Consensus Estimate of a loss of $0.04, and an improvement from a loss of $0.16 per share a year ago, representing an earnings surprise of 25% [1] - The company posted revenues of $341.98 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.17% and showing an increase from year-ago revenues of $306.12 million [2] - Over the last four quarters, Trupanion has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Outlook - Trupanion shares have declined approximately 24.1% since the beginning of the year, compared to a decline of 5.3% for the S&P 500 [3] - The company's earnings outlook is crucial for investors, with current consensus EPS estimate for the coming quarter at -$0.03 on revenues of $342.04 million, and $0.09 on $1.39 billion in revenues for the current fiscal year [7] Industry Context - The Insurance - Accident and Health industry, to which Trupanion belongs, is currently in the top 25% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $342 million, up 12% year over year [17] - Adjusted operating income increased by 46% year over year to $31.2 million [22] - Subscription adjusted operating income rose 53% year over year to over $30 million [6][20] - Average revenue per pet (ARPU) for the quarter was $77.53, up 11% year over year [17] - Net loss improved to $1.5 million or $0.03 per share from a net loss of $6.9 million or $0.16 per share in the prior year [24] Business Line Data and Key Metrics Changes - Subscription revenue was $233.1 million, up 16% year over year [17] - Other business revenue was $108.9 million, an increase of 4% year over year [21] - Subscription pets increased by 5% year over year to approximately 1,053,000 pets [18] - Subscription adjusted operating margin was 12.9% of subscription revenue, up from 9.7% in the prior year [20] Market Data and Key Metrics Changes - Monthly average retention improved to 98.28%, up from 98.25% in Q4 2024 [9][18] - The cost of paying veterinary invoices was $167.4 million, resulting in a value proposition of 71.8%, an improvement from 75.3% in the prior year [18] Company Strategy and Development Direction - The company is focusing on improving member experience and operational efficiency while maintaining disciplined growth [11][14] - Adjustments in pet acquisition investment and marketing structure are aimed at enhancing both acquisition and retention [11] - The company is transitioning to its own underwriting entity in Canada to reduce frictional costs and improve margins [43][44] Management's Comments on Operating Environment and Future Outlook - Management noted that the business is resilient and continues to perform as expected despite macroeconomic uncertainties [15][26] - The company anticipates total revenue for 2025 to be in the range of $1.39 billion to $1.425 billion, reflecting a positive outlook [26] - Management emphasized the importance of member retention and acquisition as key growth drivers moving forward [11][82] Other Important Information - The company ended the quarter with $321.8 million in cash and short-term investments, indicating financial strength [25] - The company will host an Investor Day on September 17, providing a platform for deeper engagement with investors [28] Q&A Session Summary Question: Are there notable changes in the business after Q1 due to macroeconomic factors? - Management reported no significant changes, with strong vet traffic and retention continuing as expected [33][34] Question: How is the company addressing conversion rates in underperforming territories? - The company is focusing on localized messaging and understanding lead sources to improve conversion rates [36][38] Question: What is the impact of moving away from Accelerant as an underwriter? - The transition to a wholly owned underwriting entity is expected to reduce costs and improve operational efficiency [43][44] Question: How does the company view its market share losses? - Management acknowledged market share losses but emphasized a focus on intrinsic value and disciplined growth rather than chasing market share [55][56] Question: What is the outlook for operating cash flow? - Operating cash flow is expected to remain strong, driven by increased adjusted operating income [91] Question: What is the status of customer retention for first-year customers? - Management noted a focus on improving retention for first-year customers, with strategies being implemented to address this [100][101]

Enrollment and Subscription Growth - Total pets enrolled at the end of March 31, 2025, is 1,667,637, a decrease from 1,677,570 at the end of December 31, 2024[80] - Total subscription pets enrolled reached 1,052,845 as of March 31, 2025, compared to 1,041,212 at the end of December 31, 2024, indicating growth in the subscription segment[80] - Average monthly retention rate for enrolled subscription pets was 98.28% as of March 31, 2025, slightly up from 98.25% in December 2024, showing strong member satisfaction[80] - Subscription revenue as a percentage of total revenue was 71.8% in Q1 2025, compared to 70.0% in Q4 2024, showing a 1.8 percentage point increase[90] - Total pets enrolled at period end decreased by 2% to 1,667,637, while total subscription pets enrolled increased by 5% to 1,052,845[118] Financial Performance - Total revenue increased by $35.9 million, or 12%, to $341.975 million for the three months ended March 31, 2025[118] - Revenue from the subscription business segment increased by $31.9 million, or 16%, to $233.064 million, driven by an 11% increase in monthly average revenue per pet[118] - Monthly average revenue per pet rose to $77.53, an 11% increase compared to the previous year[118] - Net loss for the period was $1.483 million, compared to a net loss of $6.852 million for the same period last year[114] - Loss before income taxes improved to $1.444 million from a loss of $6.890 million in the prior year[114] Costs and Expenses - Average pet acquisition cost (PAC) rose to $267 in March 2025, compared to $261 in December 2024, indicating higher costs in acquiring new members[80] - New pet acquisition expense for Q1 2025 was $20,516, compared to $18,354 in Q4 2024, indicating an increase of 11.8%[93] - Total cost of revenue increased by $20.978 million, or 7.8%, to $290.872 million[114] - Operating expenses increased by $10.010 million, or 23.7%, to $52.271 million, with significant increases in general and administrative expenses[114] - General and administrative expense for Q1 2025 was $19,892, up from $16,828 in Q4 2024, reflecting an increase of 18.3%[90] Insurance and Risk Management - The subscription business segment generates revenue primarily through insurance premiums, with a focus on achieving a target margin before new pet acquisition expenses[75] - The company plans to assume full insurance risk for certain products currently underwritten by third parties, aiming for increased revenue recognition[75] - The company aims to assume full insurance risk for certain products in Continental Europe, transitioning from third-party underwriting[94] - The other business segment generates revenue primarily from underwriting policies on behalf of third parties, with a different margin profile than the subscription business[95] Cash and Investments - Net cash provided by operating activities was $15.964 million for the three months ended March 31, 2025, compared to $2.434 million for the same period in 2024[130] - As of March 31, 2025, the company had $321.8 million in cash, cash equivalents, and short-term investments[132] - The Credit Facility provides up to $150.0 million of credit, with $135.0 million issued as term loans as of March 31, 2025[137] Accounting and Compliance - Non-GAAP financial measures are used to evaluate operating performance, excluding non-recurring expenses and stock-based compensation to provide clearer insights into core business results[86] - There have been no material changes to critical accounting policies or estimates compared to the previous fiscal year[148] - Management believes there have been no material changes to market risk disclosures during the three months ended March 31, 2025[150]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $342 million, up 12% year over year [15] - Subscription revenue was $233.1 million, reflecting a 16% year-over-year increase [15] - Adjusted operating income for the subscription business was $30 million, a 53% increase from the previous year [19] - Average revenue per pet (ARPU) increased to $77.53, up 11% year over year [16] - The subscription adjusted operating margin improved to 12.9%, up from 9.7% in the prior year [19] - Net loss for the quarter improved to $1.5 million, compared to a net loss of $6.9 million in the prior year [22] Business Line Data and Key Metrics Changes - The core subscription business saw revenue growth driven by increased average revenue per pet and a modest lift from growth in enrolled pets [6] - Subscription pets increased by 5% year over year to approximately 1,053,000 pets [17] - The other business segment revenue was $108.9 million, an increase of 4% year over year, but expected to decelerate [20] Market Data and Key Metrics Changes - Monthly average retention improved to 98.28%, marking the first sequential improvement in twelve quarters [8] - The cost of paying veterinary invoices was $167.4 million, resulting in a value proposition of 71.8%, an improvement from 75.3% in the prior year [17] Company Strategy and Development Direction - The company is focusing on enhancing the early-stage member experience and adjusting pet acquisition investments to better integrate acquisition and retention [10] - There is an emphasis on operational efficiencies and leveraging technology to improve member experience and reduce costs [7] - The company aims to maintain a disciplined approach to pricing and growth, focusing on high lifetime value products [52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's resilience amid macroeconomic uncertainties, noting strong vet traffic and retention trends [32] - The company anticipates continued margin expansion and a return to growth in new pet acquisitions [12] - Future guidance for total revenue is set between $1.39 billion to $1.425 billion for 2025, reflecting an increase due to Q1 overperformance [24] Other Important Information - The company will host an Investor Day on September 17, 2025, to discuss its six-month plan [27] - The company is transitioning to its own underwriting entity in Canada, which is expected to reduce frictional costs [42] Q&A Session Summary Question: Are there notable changes in the business after Q1 due to macroeconomic factors? - Management reported no significant changes, with strong vet traffic continuing into Q2 [32] Question: How is the company addressing conversion rates in underperforming territories? - The company is focusing on tailored messaging and understanding local dynamics to improve conversion rates [36] Question: What is the outlook on market share losses? - Management acknowledged share losses but emphasized a focus on adjusted operating income and disciplined growth rather than chasing market share [52] Question: Was there any favorable reserve development in Q1? - There was an adverse impact of $1.7 million from prior period developments, but overall performance was in line with expectations [59] Question: How is the company planning to get additional rate increases throughout 2025? - The company is working with regulators to secure necessary rate adjustments, with a significant portion of the book already priced ahead of the curve [83]

Core Insights - Trupanion, Inc. reported strong financial performance in Q1 2025, with total revenue reaching $342.0 million, a 12% increase compared to Q1 2024 [7] - The company experienced growth in its subscription business, with revenue of $233.1 million, marking a 16% increase year-over-year [7] - The net loss for the quarter was $(1.5) million, significantly improved from a net loss of $(6.9) million in the same period last year [7] Financial Highlights - Total enrolled pets decreased by 2% to 1,667,637 as of March 31, 2025, compared to 1,708,017 in Q1 2024 [7][22] - Subscription enrolled pets increased by 5% to 1,052,845, up from 1,006,168 in Q1 2024 [7][22] - Adjusted EBITDA for Q1 2025 was $12.2 million, compared to $4.8 million in Q1 2024 [7][31] Cash Flow and Investments - Operating cash flow was $16.0 million, a significant increase from $2.4 million in Q1 2024 [7][23] - Free cash flow improved to $14.0 million, compared to a negative free cash flow of $(0.6) million in the previous year [7][23] - As of March 31, 2025, the company held $321.8 million in cash and short-term investments [7] Operational Metrics - Monthly average revenue per pet increased to $77.53, up from $69.79 in Q1 2024 [22] - Average pet acquisition cost rose to $267, compared to $207 in the same quarter last year [22] - The average monthly retention rate was 98.28%, slightly down from 98.41% in Q1 2024 [22]

Company Overview - Trupanion, Inc. is a leader in medical insurance for pets, specifically cats and dogs, operating in the United States, Canada, parts of Continental Europe, and Australia with over 1,000,000 pets currently enrolled [2] - The company has been providing pet owners with peace of mind for over two decades, focusing on pet recovery rather than financial stress [2] - Trupanion offers unlimited payouts for the life of pets and is the only North American provider with technology to pay veterinarians directly at the time of checkout [2] Recent Developments - Trupanion published its 2024 annual shareholder letter from CEO and President Margi Tooth, which is available on the Company's Investor Relations website [1]