Q1 2020 Earnings Call
No block on should be Trupanion, Inc. First quarter 2020 financial results conference call at this time I'll persistent Arnie listen only about a brief question and answer session will follow the file presentation, if anyone should require operator system.
To compensate for 30 zero on your cell phone keypad.
How's your mind or the conference of being recorded and is now my pleasure to introduce your whole Miss Laura Bainbridge had a corporate communications. Thank you you may be gotten.
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Welcome to Trupanion first quarter 2020 financial results conference call.
Participating on today's call or <unk>, Chief Executive Officer, and Trisha Chief Financial Officer.
<unk> again, I would like to remind everyone that during today's conference call. We all make certain forward looking statements regarding the future operation.
Opportunities and financial performance of Trupanion within the meaning of the Safe Harbor provision the private Securities Litigation Reform Act of 1995.
If statements involve the high degree of known and unknown read some uncertainties that could cause x. result to defer materially from those discuss.
A detail discussion of beef and other and uncertainties are included in that range really.
Which can be found on our industry relations website as well as the company's most recent reports on farms and paying eight k. files with the security that Exchange Commission.
Do they presentation.
There could not that financial nicer, but many thing is a clue value with the company's departments, including without limitation fixed expenses variable expenses adjusted operating income acquisition costs internal rate of return <unk> and free cash flow.
When we use the term adjusted operating income or marking it isn't it to refer to our nonstop operating income or margin before new pet acquisition.
Unless otherwise noted markings been expenses will be presented on a non got basis.
Which excludes stock based compensation expense and appreciation expense.
These non got measures are in addition to and not a substitute her measures the financial performance prepared in accordance with the U.S. yeah.
Investors are encouraged to review the reconciliation these non-GAAP natural measures to the most directly comparable got results, which can be found in today's prefatory or on Trupanions Investor Relations website under the quarterly earnings pop.
Lastly, I would like to remind everyone, but today's call is also available by what's that untrue canyons Investor Relations website.
Replay will also be available on site.
With that I will him all over to Darryl.
Thanks, Laura good afternoon, everyone I hope this call find he's safe and healthy.
Just a few days ago, we publish your annual shareholder letter overview, a few highlights today, but would encourage you to read it in its entirety sorry in advance for the length.
We intend to hold a more for some discussion at her annual shareholder meeting on June 11th.
Similar to past years, we will have members of the management team available in acuity focused forum it had been or hope to hoe set or headquarters in Seattle, but we'll be moving to an on line format. This year, we hope you will join us.
Your opinion, we've been working remotely since early March the move was initiated proactively to support pet owners employees and community members amid covert 19 concerns around the world.
Just a handful of days, we were able to transition an estimated 90% of our workforce to a remote work environment, we were well positioned to do so at Trupanion, we know that pets get sick on weekends holidays and after hours and that's why we designed our work flow to provide 20 473 65 support.
Prior to the transition approximately 50 per cent of our workforce, including our team of territory partners work remotely.
Broke this period of change the team has done a tremendous jobs stepping up in reinforcing or commitment to the pet owners, who place their trust in Trupanion in fact, since the move customer experience metrics such as length of time to answer phone calls and the time to pay veterinary invoices have been better than ever I've never been more proud of the team.
Trupanion was designed to help pet owners budget and care for their pets, when they become sick or injured in times of uncertainty are assurance is even more important I can think of several other crisis in our 20 year history, but not one that so clearly embodies the challenges of an unexpected health crisis. This will be an opera.
Unity to reinforce our positioning Collette every veterinary hospital and every trupanion, Pat existing or new no. We are here and ready to stand behind them.
I'll talk a bit more about our plans to do so momentarily, but first I'll recap a few highlights from the first quarter total revenue grew 28% year over year and we ended the quarter with over 687000 total enrolled pets adjusted the operating income grew 26% to 12 million <unk>.
1.4 million of which was from our subscription business.
In total we deployed 9.7 million ever adjusted operating income and pet acquisition spend related to our subscription business, where estimated internal rate of return was 38%.
Our first quarter result, highlight the re occurring nature of our business model supported by high retention rates and then underpenetrated market.
In our 20 year history, we've experienced multiple system shocks, including 911, the dot com crash, the Oh wait Oh, nine great recession, and regional recessions, including the oil induce crisis in Alberta in 2015, and 16 Trupanion has persisted and grown through these periods of change.
And disruption.
In our history, there has not been one quarter, where we have not had more revenue than the previous quarter.
When the economy struggles the need to help loving responsible pet owners budget and care for their pets only becomes more important.
With each system shock, we saw a temporary slowdown of new enrollments as people digested change or uncertainty the shock period varied between weeks and months, following which veterinarians became busier again and the world began to normalize when the shock was followed by a recession messaging at the veterinarian.
Level strengthened pet ownership during the 2008 recession grew.
I've like in the behavior during the quarantine period of this pandemic to that which we feed during a snowstorm for pets in need pet owners, particularly those with Trupanion will seek out hospitals to ensure they get the veterinary care their pets require regardless, how deep the snow as.
Remember trupanion is not wellness, we are accident and illness, we cover that which cannot be foreseen.
But for those pets, who are not in immediate need owners will sit tight postpone their routine or wellness exams or leverage phone or email for non urgent veterinary advice and short the wait for the storm to pass.
As a pandemic took hold in the quarter veterinary visits dropped on average by about 20% a trend that continued into April as a reminder, wellness visits act as a primary lead source for Trupanion and we saw a corresponding decline in leads to the veterinary channel during the same time period.
Interestingly over the past several weeks, we've seen other channels increase in both leave volume and deficiencies lead quality is high and in early Q. too we've recorded several consecutive days of record conversion rates.
I'll say it again in times of uncertainty the need for our product and the ability to budget for unexpected veterinary care is even greater this is evident in our monthly retention, which remains in line with recent historical levels, even though we saw a small increase in churn for a two week period.
That we exited the quarter at a slightly reduced revenue growth runrate within her subscription business, but as Trish, we'll discuss we continue to expect respectable revenue growth in Q. too.
We are well positioned to navigate the evolving landscape, including by adjusting our pack spend in relation to market and channel opportunities. This is not a new skill to trupanion, we continuously evaluate how much we can spend on a per Pat basis, while operating within our guard rails, how about 30% to 40% internal rate of return this discipline.
Critical and the allocation of our capital.
It is important to highlight that revenue growth and cash flow our strategically linked in periods of slower revenue growth and reduce packs, Ben cash flow and profitability improves <unk>.
After the quarantine stage, we will likely enter recessionary period that may last month or year, but unlike prior recession. This one is a result of an unexpected medical problem. This is at the center of our wheel house that challenges of an unexpected health crisis will be at the top of mind for pet owners and veterinarians at your.
<unk>, we understand the power of the pet and the love Joy and healing that they bring to the family every day, especially in times like these we expect the need for our product among pet owners to grow the messaging at the veterinary level to strengthen and the value of our patent software could be even greater.
Our team of territory partners is that the core of these efforts and of the veterinary communities. They serve today's pandemic requires our field team to be creative in finding opportunities to interact with and support veterinarians and their staff unsurprisingly they have risen to this challenge.
We ended the year with 130 territory partners in the field visiting nearly 22000 veterinary hospitals across North America in 2019, the number of active hospitals those that had at least one pad in role, but trupanion in the past three months average 10315 during the year.
We ended the year with over 4850 hospitals with our software a number that has since surpass 5000 and about three dozen inside account managers. The combination of our software and account managers continues to deliver encouraging same store sales results with us sustained uplift in the number of pets.
Added per hospital per month, 48%.
The ability to pay veterinarian voices directly on behalf of our pet owners cannot be replicated nor understated, especially in times of economic and financial uncertainty in the coming months, we expect to lean into this messaging.
In 2019, we paid over 65 million in veterinary invoices through our software, which an estimated 32% where automated.
Like conversion rates automating claims provides benefits across the organization I'm pushing the team to get about 50% and 2020.
Paying the invoice instantaneously checkout will remain competitive advantage and key differentiator when communicating our value proposition two pet owners, we continue to test in integrator messaging to prospective members with the goal of improving our overall conversion rates.
As we discussed in more detail in the shareholder letter our efforts to do so during 2000 in 19 did not move the needle despite significant investment year over year, though as I noted earlier in my remarks, we have reason to be optimistic.
Customer education does not stop at the time of enrollment we need to become proficient at reinforcing this content to new members to help increase first year retention, which along with building our refer a friend and add a pet channels is key to our goal of Nirvana in 2019, pet owners, adding pets or referring.
Friends represented an average of 0.74% of our overall monthly book turn for the year average 1.42 per cent per month. The difference between the two the gap to Nirvana was a 0.04% improvement over 2018.
In summary, our financial position is solid are positioning strong and our capital deployment disciplined we're operating with high retention rate in an underpenetrated market execution is difficult yet rewarding.
And with that I'll have to call over to Trish.
Thanks, sterile and good afternoon, everyone.
I'd like to Echo Darryl sentiment, helping you are all safe than Wow.
On today's call I will discuss our first quarter results in more detail, including the trends that we saw x. sitting the quarter on the heels of the 19 pandemic along these lines all provide context into our business model and financial lovers, including how we manage to our guard rails.
Today's environment finally, all discuss our outlook for the second quarter and full year 2020.
Turning to our first quarter results at a high level. Our performance was in line with our expectations highlighting are highly visible and recurring revenue model. While we are not immune to the economic challenges. The covered pandemic presents are high retention rates and underpenetrated market.
Helped deliver consistency during periods of instability.
Total revenue for the first quarter was 111.3 million up 28% year over year and led by consistent Patton enrollment and both are subscription and other business segments.
Subscription revenue was 89.5 million in the quarter up 21% year over year.
Total enrolled subscription pets increased 14% year over year to over 508000 pets as of March 31st lead growth within our veterinary channel was strong to start the year, but as Darryl mentioned slowed in mid March due to the pandemic impacting weilminster that's that's.
Overall lead quality was high with conversion improving over the same time period.
We estimate this slowing resulted in about a thousand fewer new enrollments in the corridor.
It's worth highlighting that nearly 96% of our subscription revenue for the quarter, what's from our existing book of business further demonstrating the impact of strong retention rates on our business model.
Average monthly retention was 98.59% compared to 98.58% and the prior year period.
We continued to see strong retention rates and Q1, but did see a small uptick encoded related cancellations of about 500 pets at the very end of the quarter. We have not seen this trends continue into q. too and as of today see retention rates consistent with historical average.
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Nets, we estimate the impact of covet 19 on our pet enrollment at approximately 1500 subscription pets in the quarter monthly average revenue purpose for the quarter, what's $58, a 96 cents, an increase of 5% year over year and in line with our history.
Trickle average f., 5% to 6%.
Or other business revenue, which is comprised of revenue from other product offerings that generally have a b. to be component totaled 21.8 million for the quarter and increase of 71% year over year.
Year over year growth in our other business segment reflects an increase in the number of pets enrolled we saw strong growth and all product offerings within the segment.
Subscription gross margin was 18% of revenue in the quarter within our annual target of 18% to 21% compared to 19 per cent in the prior year period.
Are gross margin was comprised of 72.6% and paying that Mary and voices and 9.1% variable expenses as a percentage of revenue as a reminder February included a leap day this year, which means an extra day, a veterinary and voice activity compared to queue.
120, 19, we estimate this additional day impacted our veterinarian voice expense and margin by 0.7% as a percentage of rather now absent. This impact our margin would have been in line with the prior period at just under 19 per cent of revenue.
<unk> I want to note that the decrease in wellness visits that Darryl mentioned, the not result in any meaningful impact to veterinary invoice expenses, our product does not cover a predictable costs, such as wellness, but rather the unexpected accidents and illnesses.
We've seen some fluctuations in this expense over the past two months, we have not seen any significant decrease as in our veterinary invoice expense as pets are still needing trupanion, when they're sick or injured and we have been here for them.
Oh gross margin, what 16%, which includes are lower margin other business segment.
Total fixed expenses in the quarter scaled to 5.5% of total revenue down from 6.7% and the prior year period.
Generated 12 million of total adjusted operating income during the quarter and increase of 26% over the prior year period net loss in the quarter was 1.1 million.
Adjusted operating income from our subscription business segment during the quarter was 11.4 million or 13% of subscription revenue. This margin expanded 40 basis points over the prior year period.
The reminder, our target margin profile for our subscription business is to generate 15% adjusted operating margin, but for our new pad acquisition spends achieving our target margin profile of 15% will require a 1% to 2% improvement in cost of goods as a percentage.
You have revenue as well as a small amount of incremental scale insects expenses, we expect to close the gap on fixed expenses by your friends and will continue to move the ball forward on initiatives aimed at pricing as accurately to our 71% value proposition as possible during.
The quarter, we deployed 9.7 million of our adjusted operating income to acquire over 36000 news subscription pets, resulting in a pet acquisition cost of $247 in the quarter.
Compared to 7.7 million and the prior year period to acquire approximately 34000, new subscription pets, resulting in a pack up $205.
I'll take a moment's reiterate that we are continuously evaluating our pack spend ensuring we operate within our internal rate of return guardrails answer reflects current market opportunities. We continue to monitor the market real time, and our flexing our spend up or down as needed.
Revenue growth will impart depend on the opportunities available to us to deploy capital within our target at internal rates of return as a reminder, we view these revenue growth and cash flow measures as strategically linked.
Periods, where where dialing back spending we would expect to see greater free cash flow generation, while we believe the most value. It's created through the calm pounding effects of cost effective pad acquisition, we did not intend to deploy capital if we cannot achieve our target at 30 to 40 per cent returns in the first quarter.
We estimate our internal rate of return for a single average subscription business. Pat was 38 per cent at the top end of our 30% to 40% target as we noted on the prior call. We are now isolating our subscription business unit economics in our calculation of internal rate of return we believe there.
It is appropriate since it is the focus of our acquisition spends additional details behind this calculation and the margin profiles far too business segments can be found in our supplemental materials on our Investor Relations website.
Free cash flow was 1.4 million during the quarter operating cash flow in the quarter with 2.9 million compared to 4 million in the prior year period, adjusted EBITDA, What's 2 million for the quarter up from 1.7 million and the prior year period net loss was 1.1 million.
Or a three sat loss per share compared to a net loss of 1.3 million or force that loss per share in the prior year period.
Trupanions balance sheet remains strong with over 100 million of cash and investments and ample availability on the company's existing line of credit.
At March 31st we had approximately 29.8 million of long term debt.
Now turn to our outlook for the second quarter, and then update for the full year of 2020.
We cannot predict the future, especially during these uncertain times recurring nature of our business model provides us with the higher degree of visibility into our future performance than most are subscription revenue is being impacted by a change in the foreign exchange rate between the U.S. and Canadian dollars.
From 76% at the end of January to 70.5%, which was the approximate rate at the end of March. This has a 4 million dollar negative impact on full year revenue if rates remain consistent through the end of the year. Although we have monthly recurring revenue we have also.
Widens our guidance range to account for some uncertainty around the overall covet 19 impact.
As a result, we are now updating total revenue for the full year to be in the range of 471 to 478 million or 24% year over year growth at them at point for the second quarter. We are expecting total revenue in the range of 114 to 150.
Million, representing 24% growth at the midpoint or 26% growth excluding foreign exchange conversion impacts at these updated revenue levels. We expect total adjusted operating income for the year to be around 55 million with approximately 52 million coming from our.
Subscription business. This compares to our prior guidance of adjusted operating income for the full year 57 million with approximately 54 million coming from our subscription business <unk>.
Including the Fourmillion impact of F.X. and accounting for some uncertainty around <unk>. We're now updating our full year subscription revenue guidance to be in the range of 376 to 381 million, 18% growth at the mid point or 19.
Per cent growth, excluding foreign exchange conversion impacts.
Or other business segment got off to a good start to the year and we're now expecting revenue from this segment to be around 96 million for the full year and adjusted operating income to be approximately 2.7 million as I mentioned earlier, our total pet acquisition spend well flex up or down.
As needed in response to market opportunities with this in mind, we estimate are allowable acquisition spends per pet within our 30% to 40% internal rate of return guard Ralph It's 235 to $270 for the full year at the mid point, that's sort of.
Wait to total pad acquisition spend for the year of around 41 million, resulting and slightly higher profitability in cash flow compared to our outlook earlier. This year in summary, we're pleased with our Q1 performance and our ability to navigate through the current market landscape our financial position.
Strong and we will continue to be disciplined in the allocation of our capital.
Thank you for your time today, and I will now turned the call back over to Darryl.
Thanks trash before we open up to Q. in a I'd like to highlight a few upcoming investor relations events.
This weekend, we'll be hosting our annual q. in a around the Berkshire Hathaway annual shareholder meeting. Unlike prior years. The event will be hosted virtually and will feature our executive team.
To maintain the feel of the event space is limited, though we intend to post a replay to R.I.R. website. Shortly after the conclusion of the event and available for a short time only.
It may well be participating virtually in people's jobs and pause conference.
And remember to Mark your calendar for June 11th our annual shareholder meeting.
Similar to Berkshire space in the weapon or event will be limited, but we do intend to stream. The event live on the Investor Relations portion of our website additional details will be forthcoming with that will open it up for questions operator.
Thank you will now be conducting a question and answer session. Yeah. Thanks ask a question. Please dar one on your telephone keypad.
Information tone dictate your line isn't the question cue.
Press start to you that you will be a question from the queue. For instance, you think speaker may be necessary to pick up your hand that before passing the starkey one moment over your question.
I was first question comes from the line of Mark origin. So what's like Street capital. Please proceed what's your question.
Good afternoon couple Cook, a quick questions in terms of the guidance and when you're thinking about.
Particular kind of the the for your guidance.
What are you anticipated what did you bake in there in terms of yeah expectations of some type of return to normal in terms of stay at home.
Specifically, what kind of expectations you have in terms of traffic.
Given that.
A pretty decent part of your customer acquisition channel currently.
Thanks Park.
So in guidance.
We we thought about it in a few ways. One other reasons that we wanted to maintain guidance was that we've got high visibility with a strong retention rates and we thought.
It was all the appropriate to kind of update it.
We saw.
But a till we carried at the end of the quarter and four.
About a one or two week period in the beginning of April that visits down by about 20%.
I have seen in the last.
Two to three weeks end up taking the number of leave that we're getting it has not yet holy reached 100%.
But we put into the guidance that there would be some type of hesitation, well, obviously don't know how long something's going to continue encore, if it's going to go on for a month for weeks.
But as we've seen in the last few weeks.
But visitor really kind of starting to pick back up.
The guy.
Really thought was important for us was showing the impact on our adjusted operating income because I think in times of uncertainty. The most important outlook for shareholders. An investor is is to understand cash.
So you know with our guidance, we lowered our adopted operating income from about 57 million to 55 million suggested by the 2 million dollar reduction.
<unk> mentioned in her opening where mark what if we have a slower growth we would have about an additional $2 million.
<unk>.
So we're seeing.
Or anticipating slightly lower growth or lead from the veterinarian, we're not sure how long that's going to continue.
I mentioned in the opening remarks, we're also seeing some really strong retention rate conversion rate and growth in places like we're for one at a pet.
As our customer experience is really a good team was kinda headed out to the park.
Right, that's a really helpful.
Just to follow up in terms of additional.
Potential put acquisition channels.
We're hearing from a lot other companies had environment Cpms down pretty dramatically you have you guys.
Looked at the yeah, some of the traditional media and social media in terms of maybe cracking up bad spend or is it just not the right environment for that.
Oh, well certainly be off her opportunistic I mean, this quarter is really no different than any bumps recorder for the company. Our goal is to go ploy as much of our free capital as we can getting between the 30 in a 40 per cent internal rate of return.
What the team did and Q1 with just kind of a big shock kidding.
You know for the last month and maintaining a 38% internal rate of return I think is absolutely impressive we will be opportunistic where we can but we're going to stay within our guard rail, we're not going to try to grow faster than we need to.
We are going to be very concentrated on our cash. If this is like a we move out of.
What kind of a typical recession mode, there will be opportunities, where there'll be a little lower acquisition bizer spending some d. to see the loss of me some areas on conversion rate that we can spend more money on a will continue to focus on the teams you know really.
Been dynamic and now they've been moving week to week.
Great. Thank you.
Thank you are next question concerning the line of Maria but can acquire nudity. Please proceed with your question.
Thanks for taking my questions and hope everyone is safe.
No I just wanted to go back to the three competitive mode. You outlined in the shareholder letter, which are direct pay automation and pricing.
It can be on call called it.
Do you feel like a business instead of a broad adoption could benefit in the near term. If he went to be more aggressive pursue in any one of these three pillars.
Yeah kind of allowing you margins to sleep in the near term and then secondly, you called out approximately 11% active hospital growth in 19, what's your view an active hospital growth this year in light of the pandemic.
Okay.
Answer that question you know there.
A number of areas that I outlined in the shareholder letter and thanks for bringing that up for those that haven't added cats to read it I would recommend that they do.
We differentiate our product not only by having kind of the product coverage, what we believe us the highest value proposition the best customer experience.
I think when you look about our believe their pay hospitals correctly and getting our software installed and you layer on top of that.
And increasing amounts of claims automation.
That customer experience is going to be more important.
At a time when there are people are concerned about their finances, both from the veterinarian standpoint, and the pet owner standpoint.
I think that it's going to be the biggest sorry of leverage abstract the other one is.
We've really been able to get a variable in fixed expenses that operating scale over the last a 15 year and I think that puts us in a really strong cast position if we enter a long recession.
So those are the two areas that I think are the most obvious.
Unhelpful to Trupanion.
For the entire category that commander the need for away to budget for if and when it had become sick or injured. It is even greater the fact that we have a national failed for us calling on veterinarians and having the relationship I think will enhance it because this is not just to consumer message, but veterinarians are going to see and understand.
And the need of having a higher insured client base, so not only because of what we've seen historically, but even what we've seen in the last couple of weeks of lead volume in conversion rate, we're very confident that we will fare extremely well.
Over the next several months and the next year, we are planning to be able to grow slower than we might have otherwise for <unk> and we'll just see where opportunities July.
The last part of your question, let's talk about growth inactive hospital.
That's a tough one we grew up fear about 11%.
Our goal would be to grow something similar.
And then a shareholder letter it talks about the impact of adding the number of stores and how it is ultimately one of the major underpinnings and the value of the company. So I would like to be able to grow it another 11 or 12%.
A little early to stay with Cove added on one side to think that demand or needs going to be higher for the veterinarian on the other side I think it depends on how quickly the territory partners are able to get back into the hospital.
We are interacting with them both on tax methods voicemail email.
Been able to do that because we've made historically over a million face to face is it can we have strong relationship, but when we look at trying to expand the number of hospitals you know, it's gonna take earning the trust another kind of data point, we've had a number of webinars.
That had been bowl consumer and web veterinarian K. thing we've had record attendance. There. So I think there some places that would say I could be Polish animal growth on the number of active clinics might accelerate and the other side.
With <unk> made on boardwalk doubtful quarantined up maybe harder so well I can just wait to see I'll play though.
Great. Thanks, so much for the color.
Thank you <unk> question comes from the line of sweat that could your area with RVP capital markets. Please proceed with your question.
Great. Thank you I I haven't follow up on that same store sales comment that you make though.
Shareholder letter you mentioned that the growth in same store sales in 19 was driven by increased lead well. After the hospitals also help benefiting the number of that have installed software. So working eight 4000, either and 15 19 now over 5000.
What's the goal for this year and could you also remind us.
As you have more hospitals install software and have more account managers, what <unk> what are some headlines that you say.
The ability to accelerate that process. Thank you.
Well for those that.
Don't have all the details our software installed no costing for free software to install with veterinarians integrate put practice management software in a way that.
Eight and existing Klein with Trupanion is able to with a click of a button have an invoice sent to us.
And in many cases, where paying that awful another 15 seconds.
Needs to be manually adjusted as being guided typically in under five minutes that customer experience is unique trupanion I believe it's going to become more and more important.
Headway in that we have are getting more installed.
Is really the timing from the veterinarian.
We're busy can we do it next month, we've got a lot on the go it will be interesting to see if Kobe and will increase the urgency.
But we'll have to wait and see I think it's still early all else being equal prior to cope with it and we wanted to make sure we're adding more hospitals and we did the prior here so getting to six to 7000 hospitals with software I think would be a good result in 2020.
Thank you.
Thank you aren't next question comes from the line John La what people. Please proceed with your question.
Right.
Oh the first one she was on the cruise ads I think by our calculation wait gross adds up about.
7%. Your every year I didn't cause she gave a couple of reasons why that might have been depressed.
To the tune of around 1500 pets, but you also mentioned improving conversion rates for recently, so how should we think about the gross ads for the year Darrow in terms of the trend line. She that once you 20 gross add number the percentage should that be the logo watermark for the year.
Mm.
Yeah, Hi, John <unk>, a little bit of color on the numbers and then Darryl can pipe in line just the overall strategy.
So gross ads in Q1 36218, so just a little under that seven per cent Mark.
We estimate the Airways about a thousand pet intact right in the last couple of weeks of the corridor on actually Q1.
With with the Conservatives on the subscription doesn't stand we added about 3 million of conservatism from the prior guidance when you're back out any you know kind of like for like at backs.
That was really to account for some uncertainty, particularly in Q2 <unk>.
The recovery faster or slower so currently within our guidance cute too is more of the.
Low point, and then I'll wrap up ramp up as opposed to Q1 in terms of the numbers.
Okay.
Got it and then maybe Gerald this one's for you.
So many initiatives that you're working on to maybe better conveyed the direct payability of Trupanion. Then you make you mentioned that several times it seems like that's going to be a focus [noise].
<unk>.
Curious solely trupanions responsibility or you know do you believe or do you hope that any of that resides with the veterinarian as well in terms of being able to convey the advantages of express thanks guys.
Well I, we expect the the the benefit is communicated by everybody in our ecosystem. So it happens on our sales team. That's appeared 24 seven to talk to <unk>. It should be on a mobile devices that should be clear on line, we should be seeing it in our <unk>.
We should be thing it in veterinary communication, we should be seeing it from our disinclined, telling their friends in their neighborhood.
And all of those are the impact that we have seen historically I still believe there's a lot of opportunity to do a better job, particularly online.
But we have made progress and we've seen conversion rates up taking a year over year or so.
Encouraged by the strategy.
If you guys.
Thank you are next question comes from the line of David Westenberg Guggenheim Security. Please proceed what's your question.
I think servant, taking my question and I apologize for if I ask anything I've been hop in between calls today. So I'm a a question that I've got actually a lot today was on competitor in entering kind of an adjacent space to what you're doing now I know for years and you know you've dress. This a lot on the call about how you.
Competed with large companies before and there's always a a dozen or so competitors in the market at any given moment.
One might be a little bit different because it would have a national sales force. So I'm just you know given up the the call volume I I did want to just maybe ask you to to address that question.
Sure.
Yeah, I believe what you're talking about as a press release it came out from the weather.
Talking about how they have a wellness plan that integrated with an accident illness plan.
The.
The.
The press release kind of talks about it being a an innovative a new product.
From a reality standpoint, it is an existing accident illness plan that has been in the marketplace for about 10 years under written by a third party company and they added a wellness component to it. We've competed against many companies that I've had a combination of accident and illness.
<unk>.
Typically and if you watch market trends well, let's plans integrated with X. and illness have much lower retention rate. The reason for that as well as plans are typically sold as a return on investment so consumer says I'm going to buy a wellness plan, because it's going to be cheaper for me to buy it.
Then if I was too outlay the cash on my own that when it's being offered by a third party company, it's very hard to live up to that <unk>.
I think in the press release, a quick mouth on it is.
About $190 worth of well enough. If you went out to Costco or Amazon or chewy and bought the similar wellness products and added on the exam fee into vaccines is about $140 worth of value.
So it's a similar scenario, where you're it's going to be hard for the consumer to feel the return on investment and then you add that to an existing acts and illness product that has lower coverage.
It it would be interesting to see if they want to use their Nashville fell for sport because a wellness plans are actually I would think direct competition to wellness plans being offered by that Marianne and in my view.
Consumer by Wallace plan is when it is being offered by the veterinarian now the reason for that is the vet marrying can actually provided at a discount.
They do it for a reason I will give you $300 worth of stuff for $270 break it into monthly payment. If you come back to me that is a benefit to the veterinarian because it creates a sticky client and at the benefit to the pet owner. So we're completely supportive and work in many cases and the veterinary industry in parallel with exists.
Well those plans offered by veterinarians, but when it's being offered by a third party company, it's harder to offer the same value proposition.
Certainly a very capable company and I'm sure.
Well do well in the marketplace, but I think it's that strategy is something different than what we would do and primarily driven about wellness retention rates overtime.
I I realize you've had to answer a a similar type of question that on a conference call yearly you for the like the last five years.
But it was a topic of discussion today so.
<unk>.
The key you just talk about the the cancellations that they ended the core a 500 cancellations I think you said at the another quarter and then it stopped can you give it a little bit more a explanation terms of the theory behind how it happened why like that and why you know this later impact to cope it had no no no change in in that kind of turn out.
It just it just seems odd for me to conceptualize that.
Yeah.
A lotta people.
More with wellness plans <unk>, often be considered disposable or discretionary you can turn them on and off an accident illness plan a way for people to budget, particularly for our target market. They don't consider a product disposable or discretionary that's why crew previous recessions and other times we.
Maintain very high retention rate, what typically happens when headlines are dominated like 911 or or any other dramatic change is you'll see a very short little spike.
Spike that was horror, but a two week period, where and we had about an increase in about 500 cancellation that we otherwise would not have seen in the last three and a half weeks since that time, we're actually thing very very strong were to enter right. I think that's been couple by the fact that we are creating.
Our customers better today than we ever have were answering the phones factor paying claimed faster than we've ever done so our customer experience right now it's top notch so a call it to the team.
But I think it also underpinned our demographic if you're selling a product based on price.
People that value the product to start with if you're selling a product recommended by that Marianne.
The brought us covered the best value proposition like a bad customer experience you would expect high retention right.
Got it thank you very much.
Thank you. My next question comes from the line of Greg Yeah. This with North insecurity. Please prejudice your question.
Afternoon, Tricia Darryl Thanks for taking my questions first.
How did I guess that had additions in March compared to the other two months in the quarter.
Maybe if you could break that down in terms of the percentage of total ads in the quarter. Just because you know you mentioned that you you saw them starting to take back up in April despite the 20 per cent or so decline that you thought the end of March. So just wondering how would you think about the levels that you're maybe currently seeing relative to those 20% decline.
Yeah.
Hi, Greg I would say the the net additions.
He had oh runrate going into January and February.
That was obviously you don't know about 1500 pets higher then what we experienced in March <unk>. So I mean, I would think about it that way that 1500 and that and hopped was you know all within the last couple of weeks of the month.
And then we've obviously scene as yeah. That's how we entered a cute too and then every week or seeing things kind of trends a little bit a little bit better we call for a week going into April is definitely I think the lower part of you know higher.
<unk> volume and then it it's been it's been taking back up.
Incrementally we call for a week.
Got it okay. That's helpful.
And then your annual report card you did mention the solid progress just codes and achieving Nirvana and it looks like you know the spread.
Queen referrals and turn has.
Produce a little bit compared to 2018 cyclists I was just wondering if you could maybe elaborate on the categories are territories resolve a success and then maybe how we should think about that improvement difference between referrals, ensuring and 2020 relative to 2019.
[noise], Greg I'm I'm really excited about what the team is doing around.
Not for Us and I think there's a lot, but I'd like to be able to share.
The format I'd like to share it is really up a shareholder meeting when we can actually addressing talk of the teams that are implementing it but we're looking at at both on a regional and territory based we're looking at it in a very granular away. So.
The most important part is.
We've been focus we're making progress.
The shareholder meeting you could ask the teams directly what are some of the tactics are doing.
Okay. Thanks, guys.
Thank you we have reached the end of the question and answer session and the conclusion of funny call. Thank you for your participation.
Caroline and have a wonderful day.
Mm.
Hmm.
HM.
[music].