Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $353.6 million, up 12% year over year [9] - Subscription revenue increased 16% year over year to $242.2 million, with adjusted operating income rising 45% to over $33 million [6][9] - Net income improved to $9.4 million or $0.22 per share, compared to a net loss of $5.9 million in the prior year [14] - Free cash flow was $12 million, up from $4 million last year, with total free cash flow over the last four quarters reaching $61.3 million [15] Business Line Data and Key Metrics Changes - Subscription pets increased 4% year over year to over 1,066,000 pets as of June 30 [9] - Adjusted operating income for the subscription business was $33.4 million, contributing 96% of total adjusted operating income for the quarter [11] - Other business segment revenue was $111.4 million, an increase of 5% year over year, but growth is expected to decelerate [12] Market Data and Key Metrics Changes - Average monthly retention for the trailing twelve months was 98.29%, slightly down from 98.34% in the previous year [10] - Retention on a trailing three-month basis was 98.4%, up from the second quarter last year [10] Company Strategy and Development Direction - The company is focused on refining its approach to ensure appropriate pricing for each pet, emphasizing quality over quantity in pet acquisition [32] - Long-term investments in technology are improving operational efficiencies and member experience, contributing to high retention rates [20] - The company is positioned for sustainable growth with a strong financial foundation and plans to deploy adjusted operating income for future investments [21] Management's Comments on Operating Environment and Future Outlook - Management noted a modest deceleration in veterinary care costs, allowing for improved operating assumptions for the second half of the year [19] - The company expects total revenue for 2025 to be in the range of $1.417 billion to $1.434 billion, with subscription revenue projected to grow approximately 15% year over year [16] - Management remains optimistic about the potential of the food initiative, which is still in early stages but has foundational intellectual property [28] Other Important Information - The company recorded a one-time gain of $7.8 million related to preferred stock exchange for intellectual property [14] - The balance sheet showed $319.6 million in cash and short-term investments, with a reduced debt balance of $116.4 million [15] Q&A Session Summary Question: Clarification on loss ratio and seasonal trends - Management acknowledged typical seasonal lifts in Q1 and Q2 but noted a mild deceleration in costs this quarter, which was encouraging [24][26] Question: Update on food initiative - Management indicated that the food initiative is in early stages but optimistic about its potential due to acquired intellectual property [27][28] Question: Concerns about stagnant gross adds despite increased spending - Management explained the focus on quality over quantity in pet acquisition, targeting pets with higher lifetime value [32][33] Question: Expectations for gross adds in the second half of the year - Management expects a modest pickup in gross adds in the second half of the year, aligning with their growth strategy [41][52] Question: Retention strategy and pricing adjustments - Management stated that pricing is set for the back half of the year, with expectations for softer increases moving forward [65][66]