Q4 2021 Trupanion Inc Earnings Call
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Speaker 1: Greetings and welcome to the
Two opinions, Inc. Fourth quarter 2021 earnings conference call.
Speaker 2: Opinion Inc. 4th Quarter 2021 Earnings Conference Call.
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I would now like to turn the conference what do your host Laura Bainbridge Investor Relations.
Speaker 2: I would now like to turn the conference over to your host, Laura Bainbridge.
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Good afternoon, and welcome to true opinions fourth quarter in 2021 financial results conference call participating on today's call are Darryl Rawlings, Chief Executive Officer, Andrew Wolf, Chief Financial Officer, similar to prior earnings calls Mark you choose and Tricia plus will be available for the Q&A portion.
Speaker 3: Good afternoon and welcome to TruePanyon's fourth quarter and 2021 Financial Results Conference call. Participating on today's call are Daryl Rawlings, Chief Executive Officer, and Drew Wolf, Chief Financial Officer.
Speaker 3: Similar to prior earnings calls, Margie Tewes and Tricia Plus will be available for the Q&A portion of today's call.
Today's call.
Before we begin I would like to remind everyone that during today's conference call. We will make certain forward looking statements regarding the future operations opportunities and financial performance of true opinion within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1995. These statements involve a high degree of known and unknown risks and uncertainties.
Speaker 3: Before we begin, I would like to remind everyone that during today's conference call, we will make certain forward-looking statements regarding the future operations, opportunities, and financial performance of TruePanyan within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995.
Speaker 3: These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed.
That could cause actual results to differ materially from those discussed a detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our investor relations website as well as the company's most recent reports on forms 10-K, and 8-K filed with the Securities and Exchange Commission.
Speaker 3: A detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our Investor Relations website, as well as the company's most recent reports on Forms 10-K and 8-K filed with the Securities and Exchange Commission.
Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation fixed expenses variable expenses adjusted operating income acquisition cost internal rate of return adjusted EBITDA and free cash flow.
Speaker 3: Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation, fixed expenses, variable expenses, adjusted operating income, acquisition costs, internal rate of return, adjusted EBITDA, and free cash flow.
We use the term adjusted operating income or margin. It is intended to refer to our non-GAAP operating income or margin before new pet acquisition.
Speaker 3: When we use the term Adjusted Operating Income or Margin, it is intended to refer to our non-GAAP Operating Income or Margin before new pet acquisition. Unless otherwise noted, margins and expenses will be presented on a non-GAAP basis, which excludes stock-based compensation expense and depreciation expense. These non-GAAP measures are in addition to, and not a substitute for, measures of financial performance prepared in accordance with the U.S. GAAP.
Unless otherwise noted margins and expenses will be presented on a non-GAAP basis, which excludes stock based compensation expense and depreciation expense. These non-GAAP measures. In addition to and not a substitute for measures of financial performance prepared in accordance with the U S GAAP investors.
Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on your opinions Investor Relations website under the quarterly earnings Tab Lastly, I would like to remind everyone that today's call is also available via webcast on sure opinions Investor Relations website a read.
Speaker 3: Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on True Panion's Investor Relations website under the Quarterly Earnings tab. Lastly, I would like to remind everyone that today's call is also available via webcast on True Panion's Investor Relations website. A replay will also be available on the site. With that, I will hand the call over to Daryl.
They will also be available on the site.
With that I will hand, the call over to Darryl.
Thanks, Laura 2021 ramps up the first 12 months of our 60 month plan by all accounts. It was a strong year for true Banyan total revenue increased 39% to 699 million. We ended the year with over 1.1 million total enrolled pets within our subscription business across multiple <unk>.
Speaker 4: Thanks, Laura. 2021 wraps up the first 12 months of our 60-month plan. By all counts, it was a strong year for Trubanian. Total revenue increased 39% to $699 million. We ended the year with over 1.1 million total enrolled pets. Within our subscription business, across multiple brands, we had over 704,000 pets at year-end, on average staying with us 79 months.
Brand, we had over 704000 pets at year end, an average staying with US 79 months lifetime value of a pet was $717 up 10% year over year, our gap to two tropea, which measures the difference between members, adding pets or referring friends.
Speaker 4: Lifetime value of a pet was $717, up 10% year over year. Our gap to Trootopia, which measures the difference between members adding pets or referring friends and pets turning off, was 0.29, a 17 basis point improvement over 2020.
Pets churning off was 0.29, a 17 basis point improvement over 2020.
I am extremely proud of this performance, but what I'm. Most focused on is the growth in our adjusted operating income adjusted operating income represents the funds generated from our existing pets in a given period and is the single most important metric to understanding and evaluating our performance. It also serves as a proxy for <unk>.
Speaker 4: I am extremely proud of this performance, but what I'm most focused on is the growth in our adjusted operating income. Adjusted operating income represents the funds generated from our existing pets in a given period and is the single most important metric to understanding and evaluating our performance. It also serves as a proxy for value creation.
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In 2021 adjusted operating income grew 37% over the prior year. This performance is exceptional and well ahead of our 25% target we laid out in our 60 month plan. Our outperformance was a result of us doing three things really well accelerating pet growth sustaining high levels of.
Speaker 4: In 2021, Adjusted Operating Income grew 37% over the prior year. This performance is exceptional and well ahead of our 25% target we laid out in our 60-month plan. Our outperformance was the result of us doing three things really well. Accelerating pet growth, sustaining high levels of retention, and maintaining scale within our subscription business. In short, the team fired on all cylinders.
Retention and maintaining scale within our subscription business.
Sure the team fired on all cylinders within our large and Underpenetrated market, we want to deploy as much of our adjusted operating income within our targeted internal rates of return as possible as we grow and scale, we're seeing more opportunities and the team is doing a great job, putting our capital to work against them.
Speaker 4: Within our large and underpenetrated market, we want to deploy as much of our adjusted operating income within our targeted internal rates of return as possible. As we grow and scale, we're seeing more opportunities, and the team is doing a great job putting our capital to work against that.
In 2020 , one we were able to deploy 56% more capital year over year at an estimated internal rate of return of 36%. We do this while operating at scale. In fact Q4 marks the fourth quarter in the last eight where we were within 100 basis points of our 15% adjusted operating.
Speaker 4: In 2021, we were able to deploy 56% more capital year over year at an estimated internal rate of return of 36%.
Speaker 4: We do this while operating at scale. In fact, Q4 marks the fourth quarter in the last eight where we were within 100 basis points of our 15% adjusted operating margin target for our subscription business. I know we'll not hit 15% every quarter as we did in Q4, but I am encouraged by the narrowing of the range around our target. To me, in light of all the talk around inflation, it shows very strong execution.
Margin target for our subscription business I know will not hit 15% every quarter as we did in Q4, but I am encouraged by the narrowing of the range around our target to me in light of all the talk around inflation. It shows very strong execution well done team.
Hitting scale or the size in which we operate efficiently while maintaining our margin target is hard and takes discipline doing so has taken us over 20 years as we move forward and we do so with a commitment to remaining the industry's low cost operator and to reinvesting any future cost efficiencies back.
Speaker 4: Hitting scale, or the size in which we operate efficiently while maintaining our margin targets, is hard and takes discipline. Doing so has taken us over 20 years. As we move forward, and we do so with a commitment to remaining the industry's low-cost operator and to reinvesting any future cost efficiencies back into the value proposition we offer to pet owners.
Into the value proposition, we offered to pet owners I outlined our plans to do so further in our 60 month plan or 60 months plan can be found in our most recent shareholder letter on our IR website, one great benefit of being the low cost operator and building the true Panyard brand into what it is today is that we attract the interest of <unk>.
Speaker 4: I outline our plans to do so further in our 60-month plan. Our 60-month plan can be found in our most recent shareholder letter on our IR website. One great benefit of being the low-cost operator and building the Troupanian brand into what it is today is that we attract the interest of potential new strategic partners and distribution channels. We're humbled and excited when we can find partners who are leaders in their field, have long-term alignment, and recognize the value of our brand, scale, and expertise.
Potential new strategic partners and distribution channels, we're humbled and excited when we can find partners who are leaders in their field have long term alignment and recognize the value of our brand scale and expertise.
State Farm Aflac and our most recent partnership with Chewy are perfect. Examples.
Speaker 4: State Farm, Aflac, and our most recent partnership with Chewy are perfect examples.
Later this quarter, our aflac powered bikes opinion employee benefits product will be made available to select aflac brokers to begin selling this new insurance offering to work sites across North America.
Speaker 4: Later this quarter, our AFLAC Powered by Troupanion employee benefits product will be made available to select AFLAC brokers to begin selling this new insurance offering to worksites across North America.
We are excited to grow this channel through our strategic alliance with Aflac, a partnership which increases our reach and is a key component of our 60 month plan in short 'twenty 'twenty. One was an exceptionally strong year overall, we came out of the gates flying but saw growth slow in the fourth quarter in Q4.
Speaker 4: We are excited to grow this channel through our strategic alliance with AFLAC, a partnership which increases our reach and is a key component of our 60-month plan.
Speaker 4: In short, 2021 was an exceptionally strong year overall. We came out of the gates flying, but saw growth slow in the fourth quarter. In Q4, we enrolled approximately 4,000 fewer pets than in Q3. We believe this was driven by the introduction of the Delta and Omicron variants, providing some industry challenges.
We enrolled approximately 4000 fewer pets and in Q3. We believe this was driven by the introduction of the Delta and omni called variance, providing some industry challenges. So far this quarter, we're seeing activity rebound to Q3 levels results.
Speaker 4: So far this quarter, we're seeing activity rebound to Q3 level.
The results under Margeson Tricia's leadership have been humbling to say, the least years, such as 2021 or not the standard by which we measure our success I'll reiterate our goal remains to grow adjusted operating income by 25% every year for the remaining 48 months of our 60 month plan. We believe this is the right target.
Speaker 4: Results under Margie and Tricia's leadership have been humbling to say the least. Years such as 2021 are not the standard by which we measure our success. I'll reiterate, our goal remains to grow adjusted operating income by 25% every year for the remaining 48 months of our 60-month plan. We believe this is the right target for our large, underpenetrated market.
But for our large underpenetrated market.
As we work towards our 60 month plan, we want to ensure we remain organized in a way that is most effective ultimately we're a growth company and we continue to align the organization to provide clarity of the direction around this mandate as part of this Tricia recently assumed the role of Chief operating Officer and Marchi has.
Speaker 4: As we work towards our 60-month plan, we want to ensure we remain organized in a way that is most effective. Ultimately, we're a growth company, and we continue to align the organization to provide clarity of the direction around this mandate.
Speaker 4: As part of this, Tricia recently assumed the role of Chief Operating Officer, and Margie has remained President, responsible for leading the execution of our 60-month plan. While much of the day-to-day responsibilities remain the same, I expect these changes to drive greater clarity, transparency, and accountability within our organization. With that, I thank you for your time.
Remain president responsible for leading the execution of our 60 month plan well much of the day to day responsibilities were made the same I expect these changes to drive greater clarity transparency and accountability within our organization.
With that I'll hand, the call over to drew.
Thanks Darryl.
Speaker 5: Thanks, Daryl. I will focus the majority of my commentary today on our fourth quarter results. I'll also provide some framework for our outlook for both 2022 as well as our 60-month plan.
I will focus the majority of my commentary today on our fourth quarter results. I'll also provide some framework for our outlook for both 2020 two as well as our 60 month plan.
Before I do so I wanted to provide a few observations on our 2021 performance.
Speaker 5: Before I do so, I want to provide a few observations on our 2021 performance.
It was another fantastic year of growth with the strategic investment from our long term partner Aflac 2021 marks the first full year, we Werent limited by our operating cash flow guardrails. Instead, we were able to invest for returns deploying more capital at our strong internal rates of return and as a result drive significant value creation for our <unk>.
Speaker 5: It was another fantastic year of growth. With a strategic investment from our long-term partner, Aflac, 2021 marks the first full year we weren't limited by our operating cash flow guardrails. Instead, we were able to invest for returns, deploying more capital at our strong internal rates of return, and as a result, drive significant value creation for our shareholders.
Our holders. It also meant we could invest in expanding our total addressable market by adding new products and geographies, including those that are set to launch this year in short it was a strong year and it has been a privilege to join this company and be a part of it is incredible growth over the past year.
Speaker 5: It also meant we could invest in expanding our total addressable market by adding new products and geographies, including those that are set to launch this year. In short, it was a strong year and it has been a privilege to join this company and be a part of its incredible growth over the past
Turning to our fourth quarter results total revenue was $194 4 million up 36% year over year. Our performance was led by strong pet additions and sustained high levels of monthly retention in our subscription business as well as continued growth in our other business.
Speaker 5: Turning to our fourth quarter results, total revenue was $194.4 million, up 36% year-over-year. Our performance was led by strong pet additions and sustained high levels of monthly retention in our subscription business, as well as continued growth in our other business.
Within our subscription business segment revenue was $134 1 million up 26% over last year, excluding the impact of foreign exchange subscription revenue would have been $134 4 million in the quarter total enrolled subscription pets increased 22% year over year to approximately 704000.
Speaker 5: Within our subscription business segment, revenue was $134.1 million, up 26% over last year. Excluding the impact of foreign exchange, subscription revenue would have been $134.4 million in the quarter. Total enrolled subscription pets increased 22% year-over-year to approximately 704,000 pets as of December 31.
Pets as of December 31st <unk>.
Average monthly retention, which is calculated on a trailing 12 month basis was $98 seven 4% compared to 98.71% in the prior year period, we saw year over year improvement across all three categories that we measure, we're especially pleased with the improvement in first year retention given our accelerated growth.
Speaker 5: Average monthly retention, which is calculated on a trailing 12-month basis, was 98.74 percent compared to 98.71 percent in the prior year period. We saw year-over-year improvement across all three categories that we measure. We're especially pleased with the improvement in first-year retention given our accelerated
Continued expansion in this metric means we're able to invest more into our growth and target the highest sustainable lifetime values in the industry as the size of our pet portfolio grows so too does the value created from our high retention rates.
Speaker 5: Continued expansion in this metric means we're able to invest more into our growth and target the highest sustainable lifetime values in the industry. As the size of our pet portfolio grows, so too does the value created from our high retention.
Monthly average revenue per pet was $63.89, an increase of 3% year over year and growing ahead of our cost of veterinary invoices, which increased 1.9% over the same time period.
Speaker 5: Monthly average revenue per pet was $63.89, an increase of 3% year over year, and growing ahead of our cost of veterinary invoices, which increased 1.9% over the same time period.
Now that we are operating within a reasonable range of our target margin. We are focused on competing and winning with the highest value proposition in the industry that means pricing accurately to our 71% value proposition across our subcategories, including increasing or decreasing prices is necessary for example in the fourth quarter, we reduce.
Speaker 5: Now that we are operating within a reasonable range of our target margin, we are focused on competing and winning with the highest value proposition in the industry. That means pricing accurately to our 71% value proposition across our subcategories, including increasing or decreasing prices as necessary.
Speaker 5: For example, in the fourth quarter, we reduced price for 16% of pets in our portfolio. Year-over-year growth in ARPU reflects this dynamic, as well as our broadened distribution.
Price for 16% of pets in our portfolio year over year growth in <unk> reflects this dynamic as well as our broadened distribution.
Similar to past quarters, we saw the strongest net pet growth in areas, where we were most accurately price to our 71% target. This will continue to be an area of focus, particularly in light of the growing conversation on inflation in veterinary medicine, and the need for veterinarians to raise pricing.
Speaker 5: Similar to past quarters, we saw the strongest net pet growth in areas where we were most accurately priced to our 71% target. This will continue to be an area of focus, particularly in light of the growing conversation on inflation in veterinary medicine and the need for veterinarians to raise prices.
As a percentage of subscription revenue variable expenses increased slightly over the last year to 10% of revenue reflecting investments in our member experience fixed expenses were consistent with last year at 5% of revenue.
Speaker 5: As a percentage of subscription revenue, variable expenses increased slightly over the last year to 10% of revenue, reflecting investments in our member experience.
Speaker 5: Fixed expenses were consistent with last year at 5% of revenue.
After the cost of veterinary invoices variable expenses and fixed expenses, we calculate our adjusted operating income as noted our subscription adjusted operating margin was 15% hitting our target it.
Speaker 5: After the cost of veterinary invoices, variable expenses, and fixed expenses, we calculate our adjusted operating income. As noted, our subscription adjusted operating margin was 15%, hitting our target.
It is encouraging to me to hit our target margin on the back of a 3% increase in ARPA in the quarter. Once again, it highlights our cost plus approach and ARPA as an output of pricing towards 71% value proposition.
Speaker 5: It's encouraging to me to hit our target margin on the back of a 3% increase in ARPU in the quarter. Once again, it highlights our cost-plus approach, and ARPU is an output of pricing to our 71% value property.
In dollars our subscription business delivered adjusted operating income of $20 3 million, an increase of 30% over the prior year period.
Speaker 5: In dollars, our subscription business delivered adjusted operating income of $20.3 million, an increase of 30% over the prior year period.
It's worth reiterating that the vast majority of Trapan yens intrinsic values derived from our core subscription business, which is highly recurring and enables us to accurately forecast in the quarter, our subscription business accounted for 91% of our total adjusted operating income.
Speaker 5: It's worth reiterating that the vast majority of Troupanian's intrinsic values derive from our core subscription business, which is highly recurring and enables us to accurately forecast. In the quarter, our subscription business accounted for 91% of our total adjusted operations.
Now I'll turn briefly to our other business segment, which is comprised of revenue from other products and services that generally have a beat of b component and different margin profiles than our subscription business total revenue was $60 3 million compared to the prior year quarter. This is an increase of 66% year over year, reflecting an increase in pets enrolled within this segment.
Speaker 5: Now I'll turn briefly to our other business segment, which is comprised of revenue from other products and services that generally have a B2B component and different margin profiles than our subscription business.
Speaker 5: Total revenue was $60.3 million. Compared to the prior year quarter, this is an increase of 66% year-over-year, reflecting an increase in pets enrolled within this segment and the one-time effect of adding revenue from our software acquisition at the end of 2020. Adjusted operating income for the segment was approximately $2.1 million. While lower margin, our other business provides scale and data and fixed expenses, and we incur virtually no acquisition.
And the one time effect of adding revenue from our software acquisition at the end of 'twenty 'twenty adjusted operating income for the segment was approximately 2.1 million, while lower margin. Our other business provides scale and data and fixed expenses and we incur virtually no acquisition spend as a result, our total adjusted operating income was up 35% over the prior.
Speaker 5: As a result, our total adjusted operating income was up 35% over the prior year period to $22.4 million.
Year period to $22.4 million.
During the quarter, we invested $17 6 million or 28% more year over year to acquire approximately 54000, new subscription pets gross pet ads were up year over year, but down sequentially due to COVID-19 temporarily depressing industry leaves, which is recovering this resulted in a pet acquisition cost of $306 an estimated 32.
Speaker 5: During the quarter, we invested $17.6 million, or 28% more year-over-year, to acquire approximately 54,000 new subscription payers.
Speaker 5: Gross pet ads were up year over year, but down sequentially due to COVID temporarily depressing industry leads, which is recovering. This resulted in a pet acquisition cost of $306, an estimated 32% internal rate of return for a single average pet.
2% internal rate of return for a single average pet.
We also invested 0.9 million in the quarter and approximately 4 million for the full year 'twenty 'twenty. One on development costs. These are primarily related to product and international expansion, which we expect to deepen our competitive moats.
Speaker 5: We also invested $0.9 million in the quarter and approximately $4 million for the full year 2021 on development costs. These are primarily related to product and international expansion, which we expect to deepen our competitive moat.
This resulted in an adjusted EBITDA of $3 5 million compared to 2.2 million in the prior year quarter dip.
Speaker 5: This resulted in an adjusted EBITDA of $3.5 million compared to $2.2 million in the prior year quarter.
Depreciation and amortization was 2.8 million an increase of 0.5 million year over year. This increase was primarily due to the amortization of assets from our software acquisition in the fourth quarter of 2020 as a reminder, this strategic software acquisition was aimed at improving our back end processes, adding new products geographies and talent total.
Speaker 5: Depreciation and amortization was 2.8 million, an increase of 0.5 million year over year. This increase is primarily due to the amortization of assets from our software acquisition in the fourth quarter of 2020.
Speaker 5: As a reminder, this strategic software acquisition was aimed at improving our back-end processes, adding new products, geographies, and talent. Total stock-based compensation was $6.8 billion.
Stock based compensation was 6.8 plant as a result, net loss was $7 million or a loss of 17 cents per basic and diluted share compared to a net loss of $3 5 million or a loss of nine cents per basic and diluted share in the prior year period.
Speaker 5: As a result, net loss was $7 million or a loss of $0.17 per basic and diluted share compared to a net loss of $3.5 million or a loss of $0.09 per basic and diluted share in the prior year period.
On a year over year basis, the increase stock based compensation impacted net loss by 10 cents and the increased depreciation and amortization impacted net loss by one cent turning to our balance sheet. We ended the year with over $213 million in cash cash equivalents and short term investments and no debt in terms of cash flow operating cash flow.
Speaker 5: On a year-over-year basis, the increased stock-based compensation impacted net loss by $0.10, and the increased depreciation and amortization impacted net loss by $0.01.
Speaker 5: Turning to our balance sheet, we ended the year with over $213 million in cash, cash equivalents, and short-term investments, and no debt. In terms of cash flow, operating cash flow for the year ended December 31, 2021, with $7.5 million, compared to $21.5 million in 2020. Capital expenditures totaled $12.4 million in 2021, and as a result, free cash flow in the year was a negative $4.9.
For the year ended December 31, 2021 with 7.5 million compared to 21.5 million in 2020 capital expenditures totaled $12 4 million in 2021 and as a result free cash flow in the year was a negative $4 9 million.
True Canyon, we're focused on the long term and specifically our 60 month plan, we offer a high degree of transparency into our financial metrics and how we model the business.
Speaker 5: At Trupanion, we are focused on the long-term, and specifically our 60-month plan. We offer a high degree of transparency into our financial metrics and how we model the
Turning to our guidance as we enter the new year, we're evolving the way we talk about our outlook I want to take the opportunity to provide you with the forward looking information that we believe is best align with how we run and manage our business with this in mind and consistent with our 60 month plan, we want to increase our intrinsic value per share by 25% per year driven by growth.
Speaker 5: Turning to our guidance as we enter the new year, we're evolving the way we talk about our outlook. We want to take the opportunity to provide you with the forward-looking information that we believe is best aligned with how we run and manage our business.
Speaker 5: With this in mind, and consistent with our 60-month plan, we want to increase our intrinsic value per share by 25% per year, driven by growth in adjusted operating costs.
Adjusted operating income in 2022 we have a high degree of confidence in our ability to hit 25% growth in subscription adjusted operating income within our other business segment. We expect adjusted operating income in 2022 to remain largely flat as we've made the strategic decision to not grow revenue from our software business acquired in Q4 of last.
Speaker 5: In 2022, we have a high degree of confidence in our ability to hit 25% growth in subscription adjusted operating income. Within our other business segment, we expect adjusted operating income in 2022 to remain largely flat, as we've made the strategic decision to not grow revenue from our software business acquired in Q4 of last year.
Here with this large and Underpenetrated market, we plan to continue deploying as much of our adjusted operating income as we are able to within our guardrails of 30% to 40% as always we will publish our IRR metrics and the individual components. So that these returns can be validated and tracked over time over the next 12 months will be.
Speaker 5: With this large and underpenetrated market, we plan to continue deploying as much of our adjusted operating income as we are able to within our RRR guardrails of 30 to 40%. As always, we will publish our RRR metrics and the individual components so that these returns can be validated and tracked over time.
Speaker 5: Over the next 12 months, we'll be ramping up several of the initiatives in our 60-month plan that, if successful, would begin to manifest in our results in the second half of 2022, but more meaningfully so in 2023.
Ramping up several of the initiatives and our 60 month plan that if successful would begin to manifest in our results in the second half of 2022 but more meaningfully so in 'twenty 'twenty. Three these pre revenue initiatives are reflected in development expense and we continue to expect them to run at about a half a percent of revenue as a reminder, we view revenue grow.
Speaker 5: These pre-revenue initiatives are reflected in development expense, and we continue to expect them to run at about a half a percent of revenue. As a reminder, we view revenue growth and profitability as strategically linked. In periods of accelerated growth, you can expect reduced profitability due to the timing of cash flows and the value being added is not represented by the profit in a particular period. Likewise, if we grow slower, our profitability metrics will increase.
And profitability are strategically linked in periods of accelerated growth you can expect reduced profitability due to the timing of cash flows and the value being added it's not represented by the profit in a particular period. Likewise, if we grow slower our profitability metrics will increase we view this tradeoff worth making for long term value.
Speaker 5: We view this trade-off worth making for long-term value creation. We are well positioned in a large underpenetrated market and have proven our success in this industry quarter after quarter. This, combined with the expectation that the cost of veterinary care will continue to rise, provides a long runway for Troupanian's growth. We have a strong track record to build from. In fact, by our calculation, Troupanian is the only company in the S&P 600 to deliver revenue growth in excess of 20 percent per year for every year over the past decade. We look forward to keeping you posted.
Creation, we're well positioned in a large underpenetrated market and proven our success in this industry quarter. After quarter. This combined with the expectation that the cost of veterinary care will continue to rise provides a long runway for true Pena's growth, we have a strong track record to build from in fact by our calculation Chapin and is the only company in the <unk>.
N P 600 to deliver revenue growth in excess of 20% per year for every year over the past decade.
We look forward to keeping you apprised of our progress.
With that I'll hand, it back over to Darryl.
Speaker 5: With that, I'll hand it back over to Daryl.
Thanks drew before we open it up for Q&A I want to highlight our upcoming investor outreach activity.
Speaker 4: Thanks, Drew. Before we open it up for Q&A, I want to highlight our upcoming Investor Outreach activity. In the coming weeks, we'll be participating in the Raymond James Annual Growth Conference, William Blair's VMX Q&A, as well as several non-deal roadshows. For those of you who are new to the story, these are good opportunities to learn more.
In the coming weeks, we will be participating in the Raymond James Annual growth Conference William Blair's V M X Q&A as well as several non deal Roadshows for those of you who are new to the story. These are good opportunities to learn more.
For those looking to do a deeper dive into our business all point your attention to our two marquee investor facing events that will take place in 'twenty 'twenty. Two first on April 30th Margate, Tricia and I will be hosting our annual Q&A to follow the Berkshire Hathaway annual shareholder meeting in Omaha.
Speaker 4: For those looking to do a deeper dive into our business, I'll point your attention to our two Marquee Investor Facing events that will take place in 2022. First, on April 30th, Margie, Trish and I will be hosting our annual Q&A to follow the Berkshire Hathaway Annual Shareholder Meeting in Omaha.
Hi.
Over the years, we have found this to be a great event to connect with like minded investors in an informal any question goes type environment. We're planning for an in person participation this year in Omaha.
Speaker 4: Over the years, we have found this to be a great event to connect with like-minded investors in an informal, any question goes type environment. We're planning for an in-person participation this year in Omaha.
Second on June eight we will be hosting our annual shareholder meeting in person at our Seattle headquarters our annual shareholder meeting is the venue to provide updates on the initiatives in our 60 month plan and to connect with leaders of the business, including marquee and Trish.
Speaker 4: Second, on June 8th, we will be hosting our annual shareholder meeting in person at our Seattle headquarters. Our annual shareholder meeting is the venue to provide updates on the initiatives in our 60-month plan and to connect with leaders of the business, including Margie and Trish.
We are optimistic that this year will allow for in person attendance and we intend to design the event around the live experience those looking for opportunities to engage in Q&A and connect real time with the team are encouraged to travel to Seattle, We hope to see you there and with that we'll open the call up for questions.
Speaker 4: We are optimistic that this year will allow for in-person attendance, and we intend to design the event around the live experience. Those looking for opportunities to engage in Q&A and connect real-time with the team are encouraged to travel to Seattle. We hope to see you there. And with that, we'll open the call up for questions.
Thank you.
At this time, we will be.
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One moment please poll.
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The first question is from John Barnidge with Piper Sandler. Please go ahead.
Thank you for the opportunity.
Speaker 6: Thank you. Thank you for the opportunity. Vet service inflation was 5.1% in January CPI. Can you talk about the spread between vet invoice increases and then price increases? I think you talked about it last quarter as well. And then your outlook for that in 2020.
Debt service inflation was five 1% January CPI can you talk about the spread between vet invoice increases and then price increases I think he talked about it last quarter as well.
And then your outlook for that in 'twenty two.
Speaker 3: Hi, Don. This is Tricia. I'll start your question and I'm sure others may want to add a little bit of color because there's multi-facets to it.
Hi, John This is stretched out I'll I'll start your question and I'm sure others may want to add a little bit of color multi facets to it.
In general when we think about you know our pricing is based on what we're seeing come through in our invoices and targeting that 71% value proposition, that's what's driving our.
Speaker 3: In general, when we think about our pricing, it's based on what we're seeing come through in our invoices and targeting that 71 percent value proposition. That's what's driving our rates, and we're staying on top of it very frequently. For the total year, we saw the cost of our vet invoices.
Our rate and we're staying on top of it very frequently for the total year. We thought you know have the cost of arb that invoices in about four or five 6% increase in our pricing for the full year with a five 3% increase.
Speaker 3: at about 4.6% increase, and our pricing for the full year was a 5.3% increase. Now that did soften a little bit, as you can see in the fourth quarter, where we saw about 1.9% cost of that invoices coming through to us, and our pricing was about 3%.
Did soften a little bit as you can see in the fourth quarter, where we saw about 1.9% cost of that invoices coming through it a lot and our pricing was about 3%.
And so what we're trying to do is stay ahead of it stay on top of that but at a very granular level.
Speaker 3: And so, what we're trying to do is stay ahead of it, stay on top of it, but at a very granular level. So, you heard on the call, we actually decreased prices in some areas where we needed to do that to get closer to our 71% value proposition, but there are some cities where we need to
You heard on the call, we actually decreased prices in some areas, where we needed to do that to get closer to a 71% value proposition, but there are some cities and.
Like One example, palm Springs, where we saw 13%.
Speaker 3: Like one example is Palm Springs where we saw 13% cost of goods in the invoices.
Cost of goods and that invoices coming through and then others where were lower so the point is we're looking at it on a very granular basis, and we're targeting and they are the 71%.
Speaker 3: coming through and then others were lower. So the point is we're looking at it on a very granular basis and we're targeting.
Speaker 3: the 71 percent. You mentioned January . We've been looking at our January data that we're seeing coming through. I would say so far we're not seeing much of a different trend than we've seen the past couple of quarters. But early February data, and I would say it's very early, so we're still looking at it, does start to see a tick up. So we'll be monitoring that, not only in totality but at a
January we've been looking at our January data.
But we're seeing coming through I would say so far we're not seeing much of a different trend than we've seen the past couple of quarters.
But early February data and I would say, it's very early so we're still looking at it does it start to see a tick up so we'll be monitoring that not only in totality, but at a very granular and neighborhood level to make sure. We can stay on top of it we can get the pricing through that we need the good news is <unk>.
Speaker 3: very granular neighborhood level to make sure we can stay on top of it, we can get the pricing through that we need. The good news is I think we're doing a good job in terms of, as you can see from our results
I think we're doing a good job in terms of as you can see from our results targeting that 71, better heading it more consistently not only overall, but on a granular level. So we're just gonna stay at Fone.
Speaker 3: targeting that 71 better, hitting it more consistently, not only overall, but on a granular level. So we're just gonna stay focused on that and have that really drive how we're operating. Drew, do you wanna comment more on what we're looking at going forward financially?
Based on that and have that are really really drive how we're operating and Jerry do you want to comment more on what we're what we're looking at going forward financially.
Yes.
Speaker 5: Yes, so I just emphasize what Tricia's saying is we're seeing, you know, we're pricing for increases now it's mapped a little bit by us refining our pricing and actually decreasing price on part of our portfolio and Also in prior quarters, we've mentioned a change in mix as we've broadened distribution we're growing in lower cost areas and you see that come through our pricing but looking forward
Besides what Chris is saying is we're seeing you know we're pricing for increases.
Masked a little bit by us refining our pricing and actually decreasing price on part of our portfolio and also in prior quarters. We've mentioned a change in mix as we broaden distribution, we're growing in lower cost areas and you see that come through our pricing but.
Looking forward.
We don't see based on what we know now we see that we don't see those trends changing but if we do we'll continue to ship.
Speaker 5: We don't see, based on what we know now, we see that, we don't see those trends changing. But if we do, we'll continue to, as we've shown, we'll continue to price for it.
We will continue to price for it and John if I can if I can just add to that in terms of the.
Speaker 7: And John , if I can, if Margie, if I can just add to this, in terms of Tupan and overall, we believe that VETS do need to increase their rates. We believe that they're currently under-priced for all the services that they offer and they are a highly stressed, stretched very thinly in the industry and the best thing they can do is to make sure that they're pricing appropriately. We as Tricia and Drew both mentioned are looking at our pricing at a very granular level.
Overall, we believe that that's going to increase that rate and we believe that the economy under underpriced or other services that they offer and they are a highly stressed.
That stretch right than many in the industry and the best thing. They can do is to make sure that that pricing appropriately we have tricia and drink, but I've mentioned that looking at our pricing in a very granular level that we feel confident we can stay on top of that.
Speaker 7: So we feel confident we can stay on top of that, but for the good of the industry and also to increase the demand for chupanion, it's better that they increase the rates because they need to.
And I'll say to increase it at all because Japan, and it's better that they increase the right because they need to.
Okay, and then maybe my follow up question I believe.
Speaker 6: Okay. And then maybe my follow-up question. I believe adjusted operating income is now the guidance you're talking about. I didn't hear anything on revenue. Can you maybe talk about that shift in maybe how the new partnerships you're launching with Chewy and Aflac fit within that shift?
Adjusted operating income is now the guidance you're talking about I didn't hear anything on revenue can you maybe talk about that shift and maybe how the.
New partnerships are launching with chewy and aflac fit within that shift.
Sure this is true.
Yes, so what we've done is to evolve our approach consistent with how we've given long term guidance is in the 60 month plan and then specifically for 2022 to focus on a bottom line metric like adjusted operating income.
Speaker 5: Yes, so what we've done is evolve our approach consistent with how we've given long-term guidance in the 60-month plan and then specifically for 2022 to focus on a bottom line metric like adjusted operating income.
Because that's what we manage to an end as we roll out initiatives we are targeting.
Speaker 5: because that's what we managed to and as we roll out initiatives we are targeting similar margins and adjust operating income. So that's what we thought it was a better way to guide to and then with
Similar margins and adjusted operating income. So that's why we thought it was a better way to guide to and then with.
Consistent margins now that we're at scale.
Speaker 5: Consistent margins now that we're at scale. You can back into other metrics and the IRRs that we're targeting. So we're just evolving from starting at the top line and going down to starting at the bottom line and going up.
You can back into other metrics and the IRR is that we're targeting so we're just evolving from giving you know starting at the top line and going down to starting at the bottom line and going up but embedded in our guidance is all of the initiatives that we've already talked about.
Speaker 5: But embedded in our guidance is all the initiatives that we've already talked about as that will, you know, ramp up slowly during the year and then more meaningful, more meaningfully impact 2020.
As you know.
Ramp up slowly during the year, and then more meaningful more meaningfully impact 2023.
Yeah, and I'll just add thank you, Chris I'll, just add a little more here because we know this is a better that shaft at an evolution you know in general we have always provided a lot of transparency it whether it's on the calls or the shareholder letter and we don't intend for our philosophy around transfer.
Speaker 3: I'll just add a little more here, because we know this is a bit of a shift and an evolution. In general, we have always provided a lot of transparency, whether it's on the calls or the shareholder letters. We don't intend for our philosophy around transparency to change, but we also want to make sure we're speaking in a way that is very consistent with how we're looking at the business, running the business, metrics that we're targeting as we have more products and more geographies.
Parents seem to change, but we also want to make sure. We're speaking in a way that is very consistent with how we're looking at the business running the business metrics that we're targeting as you know we have more products and enlarge geographies and as drew mentioned by honing in on.
Speaker 3: As Drew mentioned, you know, by honing in on, you know, the adjusted operating income and our target margins, which, you know, we're very close to achieving, can really back into, you know, the 25% then on...
You know the adjusted operating income and our target margins, which you know we're we're very close to achieving can really back into you know the the 25% then on an overall on the top line as well and I think these new initiatives Wow.
Speaker 3: overall on the top line as well. And I think these new initiatives, while
They haven't many of them have not launched yet we don't have great visibility into then they'll ramp up likely slowly as they are those on a longer term.
Speaker 3: They haven't, many of them have not launched yet. We don't have great visibility into them. They'll ramp up likely slowly as the year goes on. Longer term, you know, they give us more and more confidence that our 25% growth rate that we've talked about in the 60-month plan,
But more and more confident that our 25% growth rate that we've talked about and then the 60 month plan.
It is achievable because that level level of growth you know year after year after.
Speaker 3: is achievable because that level of growth year after year after year is not, while we've done it for a long time, it's not easy. It takes good execution and we're focused on that. So hopefully that helps just add a little bit of color to how we're thinking about it.
Figure is not well we've done it for a long time, it's not easy it takes I've got execution and we're focused on that so hopefully that helps.
A little bit of color to how we're thinking about it.
It does thank you.
Thank you.
Speaker 2: Thank you. The next question is from Shweta Khajuria with Evaco ISI. Please go ahead.
Next question is from Shred, Oh, Julia with Evercore ISI. Please go ahead.
Okay. Thank you let me try two please.
It's really a partnership possible to provide some context on how we should think about framing that.
Speaker 8: QE partnership, possible to please provide some context on how we should think about framing that.
Basically the meaning of the magnitude of that opportunity as you think about this year and just you know next 48 months I guess and then the second question is on marketing environment could you. Please provide some context on what you saw just generally.
Speaker 8: opportunity. So basically the meaning and magnitude of that opportunity as you think about this year and just, you know, next 48 months, I guess.
Speaker 8: And then the second question is on marketing environment. Could you please provide some context on what you saw, just generally, in terms of the marketing environment, whether it was a crowded market, and in particular, were there any channels that were really well-viewed, and or were there some channels that were a disappointment to a negative surprise, and which ones were those? And then same question for Q1.
In terms of the marketing environment, whether it was a crowded market and in particular, what are there any channels that worked really well for you.
Or were there some channels that were a disappointment to a negative surprises six months what are those and then same question for Q1 to Holland.
Now that we are off the holiday season, what's the marketing environment looking like right now thank you.
Speaker 8: And now that we are off the holiday season, what's the marketing environment looking like right now? Thank you.
Sure.
Speaker 4: Shweta, you kept layering on questions there at the end, but I'm going to answer eye-level first. That's okay.
He kept layering on questions here at the end, but I'm going to answer sorry long answer if that's okay.
That's okay.
Speaker 4: That's okay, I'll hand over all the details to Margie, but when we're thinking about bringing on...
I'll hand over Oh, the details to market, but when we're thinking about bringing on.
New partnerships, new distribution channels, new products, expanding geography, all of the things that we're looking at comes down to a single focus how is it that we can inform and educate pet owners or households, when they get a new path to that household and all of our partnerships are meant.
Speaker 4: new partnerships, new distribution channels, new products, expanding geography. All of the things that we're looking at comes down to a single focus.
Speaker 4: How is it that we can inform and educate pet owners or households when they get a new pet to the household?
Speaker 4: And all of our partnerships are meant to be a way for us to initiate conversations.
Could be a way for us to initiate conversations are from people that have strong authority being veterinarians are breeders or chewy is an online retailer or aflac for worksite benefits et cetera.
Speaker 4: from people that have strong authority being veterinarians or breeders or Chewy as an online retailer or Aflac for worksite benefits, etc. It's really about us being at the front of the lead generation and educating consumers on why it's important to have high quality medical insurance to help the budget.
It's really about us being at the front of the lead generation and educating consumers on why it's important to have high quality medical insurance to help their budget.
And that's kind of the lens that we're looking for and that's a lot of it is in the 16 months plan, but I'll kind of hand, it over to argue to give you more details.
Speaker 4: And that's kind of the lens that we're looking for. And that's a lot of it is in the 60-month plan. But I'll kind of hand it over to Margie to give you more details.
Yeah, Hi.
Speaker 7: Hi Shweta, so just to finish off on the TUI partnership, obviously we're very excited to be and honestly humbled to be their partner. In terms of the magnitude for 2022,
Just to finish off on the trade policy.
They tend to be at the analyst day humbled to be that partner in terms of the magnitude for 2022, we're going to start off fatty styling uncontrolled and throw out there at the beginning of a mid point of the year and then throughout the year, we will grow and expand that at a pace that we feel comfortable where together we are well aligned partner.
Speaker 7: We're going to start off fairly slowly and controlled throughout the beginning of midpoint of the year, and then throughout the year we will grow and expand that at a pace that we feel comfortable with together. We're a well-aligned partner with them, and I think we have some
With them and I think we have some great opportunity in front of us the Dallas point, it's a great opportunity to start to connect with people in an online environment that half the partnership and support of a fantastic brand in Chile.
Speaker 7: Great opportunity in front of us, to Daryl's point, it's a great opportunity to start to connect with people in an online environment that have the partnership and support of a fantastic brand in Chewy.
In terms of the marketing environment, you'll get your second question. There were a couple of questions in that what are we seeing in the quarter in Q4, a couple of things happen say, we we went into the quarter pretty aggressively with all of our spend and we had a solid start in terms of the lead volume daily volume was up it's been continues to be out throughout the year at all.
Speaker 7: In terms of the marketing environment, your second question, there are a couple of questions in there. What did we see in the quarter in Q4? A couple of things happened. We went into the quarter pretty aggressively with our spend.
Speaker 7: and we had a solid start in terms of the lead volume. The lead volume was up. It's been continuing to be up throughout the year, last year. It started to slow a little bit. We saw a pocket of Omicron and really the pandemic started to hit as the world saw at the back end of that quarter. We saw that coming. We saw it happening. We saw the lead softening. We made a very deliberate decision, unlike at the beginning of the pandemic when we weren't really sure what was going to happen.
Yeah started to slow a little bit we saw a pocket of Oh, my calling and vary the pandemic started to hit us as the World tour at the backend of that quarter and we saw that coming we start happening we're still that a tough name we made a very deliberate decision. Unlike at the beginning of the pandemic when we weren't really sure what was going to happen. We did have really continued to bankruptcy.
Speaker 7: We deliberately continue to be aggressive with our spend in that space to really help drive through the pandemic that we saw happening and also to give us a really good start to the year.
With our spend in our space to really help drive through a pandemic that we still happening and authenticate that's a really good start to the year.
2020.
In terms of channels, we saw a very similar trend across all of our China, Let's say there wasn't one that was just for me. It would take care of me badly want someone that was performing but it can be well am I will say that there was a charge we had in terms of conversion, which we noted some tenants execution through the quarter and we were able to write to find that we're supposed to have that problem execution. We've always said it's challenging.
Speaker 7: In terms of channels, we saw a very similar trend across all of our channels, so there wasn't one that was performing particularly badly, wasn't one that was performing particularly well. I will say that there was a challenge we had in terms of conversion, which we noticed in terms of execution through the quarter.
Speaker 7: and we were able to rectify that. We've spotted the problem. Execution we've always said is challenging and it's great when we can identify where there are issues and we can fix them.
And it's great. When we can identify where there are issues and we can fix them I'm happy to say, we have picked them start moving into Q1 went back up to the levels that we saw in Q3 in terms of growth rate am I, saying that April trying to sharpen up nicely.
Speaker 7: I'm happy to say we have fixed them, so moving into Q1, we're back up to the levels that we saw at Q3 in terms of growth rates.
Speaker 7: and seeing that overall starting to sharpen up nicely. So, I think positive end to the quarter and really strong start to Q1 as well. OK. Thanks, Gerald. Thanks, Margie. Thank you.
I think a positive end to the quarter and very strong start to Q1 as well.
Okay. Thanks, Darryl Thanks Marty.
Thank you.
Thank you.
The next question is from John well, let Stifel. Please go ahead.
Speaker 9: go ahead. Hey, guys. Thanks. Good afternoon. Maybe the first one is just to start the gross ads. I think they were down Q over Q for the first time.
Hey, guys. Thanks, and good afternoon, maybe the first one is just to start the gross adds I think they were down Q over Q for the first time.
Since the fourth quarter of 2019, and I get it you talked about a specific COVID-19 headwind, but.
Speaker 10: since the fourth quarter of 2019, and I get it, you talked about, you know, a specific COVID headwind, but do you have a way of quantifying what that was when we think about the impact to gross ads? I don't know, $4,000 or $5,000 if you want to throw a number out there, and then how do we think about that coming back into the queue? In other words, does it all come back in like 1-2-22? You mentioned a good start to the year and then it normalizes, I'm just trying to think about that cadence.
Do you have a way of quantifying what that was when we think about the.
The impact to gross adds I don't know four or 5000, if you want to throw a number out there and then how do we think about that coming back into the queue. In other words does it all come back in like <unk> 'twenty. Two you mentioned a good start to the year and then it normalizes I'm just trying to think about that cadence.
Our gross adds which again stepped down in <unk>, how we think about it starting the year in 2022 and then subsequently in the corners after.
Speaker 10: of gross ads, which again, step down in 4Q, how we think about it starting the year in 2022 and then subsequently in the quarters after.
Yeah, Hi, John Smoggy, I'll, I'll kick off and others can add in terms of you're right 4000 was about what we thought with the difference between what we are anticipating any impacts of the COVID-19 headwind.
Speaker 7: Hi John , it's Margie. I'll kick off and obviously others can add. So in terms, you're right, 4,000 was about what we thought was the difference between what we were anticipating and the impact of the COVID headwind.
In terms of recovery, we've seen since the mid point.
Speaker 7: You know, in terms of recovery, we've seen since the midpoint of January , we've started to see that really come back. One of the key things that we look at when we're going into any month, we don't typically think about it quarter over quarter, we're thinking on a monthly basis, especially in times of pandemic when you've got such a variability. We look at the overall market opportunity for us in a given period of time. So we use Google data, we use all the data that's available to us, so we can see how many people are searching for the term pet insurance.
Of January we're starting to see that really come back one of the key things that we look at when we're going into any any month. We don't typically think about it of course I have of course, what we're thinking on a monthly basis, especially in times of pandemic when you've got such a variability we look at the overall market opportunity for us in a given period of time. So we use Google data, we use those data sets available too.
So we can see how many people are searching for the town pet insurance. So that people, we believed to be in markets and people don't typically look for pet insurance. So unless they are in market at the time and so what we found is at the beginning of the pandemic back in 2020. So March April 2020 that the volume of people start, saying really came down.
Speaker 7: So they're people we believe to be in market. You know, people don't typically look for pet insurance unless they are in market at the time. And so what we found is at the beginning of the pandemic back in 2020, so March, April 2020, that the volume of people searching really came down. That was the time when, I'm sure you'll remember, we doubled down, we focused on what we could control, which is our member experience. And we really started to pull back on our spend because we weren't sure where it was gonna go.
That was the time when I'm sure you'll remember we double down we focused on what we can control, which is our member experience and we really started to pull back on our spend because we weren't sure where it was gonna Guy.
When we hit a semi parents or in Q4, we were looking at the same such volume, which had recovered since that since Q1 and two of 2020. It did to the same level at the beginning of the pandemic stay for us that told us that the market with a lot softer than it had been and we made a very conscious decision to push hard and we wanted to.
Speaker 7: When we hit a similar period, so in Q4, we were looking at the same search volume, which had recovered since Q1 and Q2 of 2020. It dipped to the same levels at the beginning of the pandemic. So for us, that told us that the market was a lot softer than it had been.
Speaker 7: And we made a very conscious decision to push hard. And we wanted to push hard to do that aggressively, not only so we could keep our brand front of mind from a pet owner and veterinarian perspective, but also because we were confident it was going to return.
Push hard to get aggressively and he said, we could keep our brand front of mind from a pattern of veterinarian perspective, but it lets say it because we were confident it was gonna return. We also have immense confidence in the team's ability to ton leave it on an office, we need to and we've got really sharp at doing that as a result of that we've seen some really good growth coming in at the as I mentioned at the top.
Speaker 7: We also have immense confidence in the team's ability to turn levers on and off as we need to. We've got really sharp at doing that.
Speaker 7: As a result of that, we've seen some really good growth coming in as I mentioned at the top half of the year so far, top part of the year.
Yes, I saw him to a part of it yesterday, we're happy with the lead volume, we're happy with conversion rate. We've corrected some issues. We had from an execution point of view I'm sure there won't be other issues that we will have and from an execution point of view, but right now I feel confident and where we're going and saying that momentum come back up to the levels that we would expect it to be.
Speaker 7: We're happy with the lead volume, we're happy with conversion rate, we've corrected some issues we had from an execution point of view.
Speaker 7: I'm sure there will be other issues that we will have from an execution point of view, but right now I feel confident in where we're going and seeing that momentum come back up to the levels that we would expect it to be at.
At and Ah I think we're all happy with that with a fabric performance they fall.
Speaker 7: And I think, you know, overall happy with the February performance so far.
So I think that.
Speaker 11: anything to add? I mean just context Q4 of 21 we grew net pets new growth 11%
I mean, just context Q4 of 'twenty, one we grew net.
New growth of 11% over a.
Huge comp of Q4 of 2020.
Speaker 4: huge comp of Q4 of 2020 and all of that with the challenges in the marketplace that have rebounded. I think the team
And all of that with the the you know the challenges in the marketplace that have rebounded so.
I think the team.
Great and.
Speaker 4: Did great and looking forward to seeing 2020 playoff.
Looking forward to seeing a 'twenty one to play out.
Okay.
Helpful. Thanks for all that color and the second question might have a couple of different parts to it maybe the most straightforward just on the chewy partnership.
Speaker 10: Okay, that's helpful. Thanks for all that, Collar. And the second question might have a couple different parts to it. Maybe the most straightforward, just on the Chewy partnership.
How that's structured in other words is there an equity component when we think about the compensation going to chewy from a pack perspective, again as or an equity component tied to that and then just backing up for a second you guys have.
Speaker 10: how that's structured. In other words, is there an equity component when we think about, you know, the compensation going to CHUI from sort of a PAC perspective? Again, is there an equity component tied to that? And then just backing up for a second, you know, guys, I'm a little inundated with emails saying, you know, questions around the guidance. So can you just help me out here for a second? You were very clear that the adjusted operating income of 25% on subscription.
Inundated with emails, saying you know questions around the guidance. So can you just help me out here for a second you were very clear that the adjusted operating income of 25% and subscription flat on other or did you commit to an adjusted IRR number or is that still expected to be 30% to 40% and then you know maybe just with all due respect you were just talking about how you are.
Speaker 10: flat-on other did you commit to an adjusted higher our number is that still expected to be thirty to forty percent and then images with all due respect you were just talking about how you're one of us you companies in the s and p six hundred to have this revenue growth rate in your rare breed the most straightforward numbers a revenue number not an adjusted operating income numbers you can you just sort of any better explain why at this point on the decided to back away from providing the revenue number
One of a few companies in the S&P 600 to have this revenue growth rate and you're a rare breed. The most straightforward numbers of revenue number not in adjusted operating income number. So can you just sort of maybe better explain why at this point in time, you've decided to back away from providing the revenue number. Thank you.
Oh well. The first question was about chewy and we think we've got great alignment. As a reminder are meant to run on the same type of margins and the same type of internal rates of return as our core subscription business.
Speaker 4: Well, the first question was about Chewy. We think we've got great alignment. As a reminder, it's meant to run on the same type of margins and the same type of internal rates of return as our core subscription business. We have mentioned earlier that Chewy would have the option of taking some of that what otherwise would be PAC spend in stock if they choose up to a certain cap. So we think we've got great long-term alignment.
We have mentioned earlier that you would have the option of taking some of that what otherwise would be Pac spend.
And stock if they choose up to a certain cap. So we think we've got great long term alignment.
Your other areas of questions.
Speaker 4: You know, your other areas of questions...
You know why are we talking about adjusted operating income.
Speaker 4: Why are we talking about adjusted operating income?
Because adjusted operating income is more meaningful to shareholders when they understand the cash flow of our business and if our margins are relatively stable, it's very easy for somebody to do the math to figure out what the impact of revenue.
Speaker 4: Because adjusted operating income is more meaningful to shareholders when they understand the cash flow of our
Speaker 4: And if our margins are relatively stable, it's very easy for somebody to do the math to figure out what the impact of revenue is.
A lot of companies can give revenue guidance, but without giving guidance down to a contribution margin of the margins that you were able to spend it doesn't give investors as much opportunity. The other part is internal rates of return and we are committed.
Speaker 4: A lot of companies can give revenue guidance, but without giving guidance down to a contribution margin or the margins that you're able to spend, it doesn't give investors as much opportunity. The other part is internal rates of return, and we are committed to staying between our guardrails of 30% to 40%. Perfect. Thank you.
Committed to staying between our guardrails of 30% to 40%.
Perfect. Thank you.
Thank you. The next question is from.
Yeah flips with Canaccord. Please go ahead.
Speaker 2: Maria rips with can-a-cod. Please go ahead.
Oh, great. Thanks for taking my questions I just wanted to follow up on the true partnership and just maybe expanding on some of the questions.
Speaker 12: Great. Thanks for taking my questions. I just wanted to follow up on the Q-Partnership and just maybe expanding on some of the Shweta's questions.
So if we look at their customer base of about 20 million do you have a sense of sort of what portion of that could be more immediate addressable opportunity for you here in the near term anything maybe you can share around that that base by sort of by age et cetera, and sort of what would you consider to be a successful outcome here, let's say four or five years from now in terms of.
Speaker 12: So if we look at their customer base of about 20 million, do you have a sense of sort of what portion of that could be a more immediate addressable opportunity for you here in the near term? Anything maybe you can share around their pet base by sort of by age, et cetera. And sort of what would you consider to be a successful outcome here, let's say four or five years from now in terms of a mix of two customers taking on one of these plans?
The mix of two customers taken on one of these plants.
Just trying to understand if this partnership could potentially sort of accelerate the adoption of that insurance across the space.
Speaker 12: Just trying to understand if this partnership could potentially sort of accelerate the adoption of that insurance across the space.
Yeah sure Hi, Maria it's nugget here in terms of Chile, 20 million base I mean at the point that it's really critical for us. They are a partner that we are working with to help educate and inform more passionate about the benefits of having high quality medical insurance in terms of what is their immediate addressable opportunity.
Speaker 7: Yeah, sure. Hi, Maria. It's Margie here. So, in terms of Chewy's $20 million base, I mean, the point that is really critical for us is they are a partner that we are working with to help educate and inform more persons about the benefits of having high-quality medical insurance.
Speaker 7: In terms of what is their immediate addressable opportunity, we have reason to believe that they don't have any more or less penetration rate than the average population. We don't know, and that's the reality, so we're excited to work with them to bring to light something that we believe every pet owner should be aware of, and every pet owner should have the information available to make a conscious decision on whether they're insuring their pets.
We have reason to believe that they you know they don't have any more or less penetration rate than the average population, we don't know and not see the reality. So we're excited to work with them to bring to light. It's something that we believe every person I should be aware of and every person I should have the information available to make a conscious decision on whether they are ensuring that.
Pat.
That's something that to me is is I'm very eager to do it well and I think for US what we believe together is that we can help not only increased awareness and education, but ultimately adoption and drive more and show our clients into the battery practice to get them the care they need.
Speaker 7: That's something that TUI is very eager to do as well and I think for us what we believe together is that we can help not only increase awareness and education but ultimately adoption and drive more insured clients into the veterinary practice to get them the care they need.
A successful outcome for us it is honestly, making sure that there is an increased awareness, we believe that 2% penetration where wifely underpenetrated. It doesn't there's a lot of market to take and and together. We're hopeful that we can do that and the alignment that we have I think as long as they say it's like it.
Speaker 7: A successful outcome for us is honestly making sure that there is an increased awareness. We believe at 2% penetration we're woefully underpenetrated, there's a lot of market to take and together we're hopeful that we can do that. And the alignment that we have I think as partners is a good starting place but we'll be able to share more once we get into the market with the product.
It's a good starting place that we'll be able to schamel once we get into into the market with the products.
Got it that's very helpful. Thank you Marty and then secondly.
Speaker 12: Got it. That's very helpful. Thank you, Margie. And then secondly, can you maybe share any color around sort of your launches of PHI Direct and Forkin in Canada last year and is there an updated timeline for the U.S. launch at this point?
Can you maybe share any color around sort of.
Youll launches a P tried to rack and broken in Canada last year and is there an updated timeline for the U S launch at this point.
Yeah, So, let's say I'm personally I'm fucking are now about six months in them from that launch in the Canadian market. We're happy to say that overall in terms of the lead volume. We're looking really healthy we're definitely reaching person is what they are in the right way. The area that we are still continuing to focus on is that to work on our conversion rates.
Speaker 7: Yeah, sure. So, PHI and Firkin are now about six months in from their launch in the Canadian market. We're happy to see that overall, in terms of the lead volume, we're looking really healthy. We're definitely reaching pet owners in the right way. The area that we are still continuing to focus on is to work on our conversion rates. We operate within the same IRR guardrails for PHI and Firkin as we do for the core subscription business for Trupanian products.
We operate within the same IRR guardrail to parachute in fact, and it's been doing for the core subscription business that you're planning for that.
I would say for us, it's really a case of refining that conversion journey, making sure that we're not just paying for leads without converting them. When we get back to a level, we felt comfortable with with another 30% to 40%. That's when we will trigger and move into the U S market, we're not going to do that without having the opportunity to really know we can refine this thing to leave us with ice to Brian is as we can with our core subscription business.
Speaker 7: So for us, it's really a case of refining that conversion journey, making sure that we're not just paying for leads without converting them.
Speaker 7: When we get that to a level we feel comfortable with, within our 30-40%, that's when we will trigger and move into the US market. We're not going to do that without having the opportunity to really know we can refine the same levers for those two brands as we can with our core subscription business.
So Thailand is still to be determined but the teams are working hard on refining that process and are looking forward to them coming to the U S and hopefully the not too distant future.
Speaker 7: Timeline is still to be determined, but the teams are working hard on refining that process and looking forward to them coming to the US in hopefully the not-too-distant future.
Got it thanks, a lot for the color.
Thank you.
Next question is from Elliot Wilbur with Raymond James. Please go ahead.
Speaker 2: Thank you. The next question is from Elliot verbo with women chains. Please go ahead.
Thanks. Good afternoon first question I wanted to ask about the upward trend in the variable cost of revenue within the subscription business, obviously, just relatively small increments, but it keeps getting closer and closer to this 10% level because 9.8 <expletive> in the quarter.
Speaker 13: Thanks. Good afternoon. First question, I wanted to ask about the upward trend in the variable cost of revenue within the subscription business, obviously just relatively small increments, but you know, it keeps getting closer and closer to this 10% level.
Speaker 13: because 9.8% in the quarter and for the full year, just trying to get a little bit better sense of sort of what's driving that upward progression. Is it retention costs or is there something else in there? And I mean, is it possible to say that, you know, there's a, a
For the full year, just trying to get a little bit better sense of sort of what's driving that upward progression is it retention cost or is there something else in there and I mean is it possible to say that you know there's a a a a ceiling on that or is there some.
Speaker 13: ceiling on that? Or is there some level at which you think that that metric is going to hold? Or is there a possibility that we actually see this move above the 10% mark? That was the first question.
Level at which you think that.
That that metric is going to hold or is there a possibility that we actually see this move above the 10% Mark that was first question.
Sure Hi, this is tricia.
Yeah, we did see less our variable expenses, which as a reminder.
Speaker 3: Yeah, we did see this variable expenses, which as a reminder, you know, it's really the cost associated with servicing our members through customer care, retention efforts.
The costs associated with servicing our members through customer care or attention efforts, particularly after the first year and other strategic initiatives that are designed at our member experience.
Speaker 3: after the first year and other strategic initiatives that are designed at our member experience.
And we did make a strategic decision early on in 2020 , one to invest more heavily.
Speaker 3: And we did make a strategic decision early on in 2021 to invest more heavily here, particularly on retention initiatives that we had in mind to help improve our retention rates, which were very successful during the year, as you can see from our retention metrics.
Heavily here, particularly on our retention initiatives are two that we had in mind to help improve our retention rates.
Which were very successful during the year I can see from from our retention metrics I would say you know overall I wouldn't expect it to go beyond 10% and we are looking as with anything to.
Speaker 3: I would say, you know, overall, I wouldn't expect it to go beyond 10 percent. We are looking, as with anything, to, you know, maintain the metrics that we've been able to drive, but scale them longer term, because our ultimate goal is to be giving as much back to the member in terms of that invoice payment as possible. But this was a worthwhile investment that we continued throughout the year as we saw the results play out in return.
Maintain the metrics that we've been able to drive it but scaled in the longer term.
Because our ultimate goal is to be giving as much back to the member in terms of that invoice payments as possible that this was a worthwhile investment that we continued throughout the year as we saw the results play play out and retention.
And this is true I would add that the bigger our portfolio gets each basis point of retention is worth more so it was a good investment and then I would also add that where were targeting a 15% adjusted operating margin. So in the quarter, even when it was at 10% we delivered that so that's how we're running the business going forward.
Speaker 5: And this is true. I'd add that the bigger our portfolio gets, each basis point of retention is worth more. So it was a good investment. And then I would also add that we're targeting a 15% adjusted operating margin. And so in the quarter, even when it was that 10%, we delivered that. So that's how we're running the business going forward.
Sure.
Okay. Thanks, maybe just a little bit more.
Speaker 13: Okay. Thanks. Maybe just a little bit more of a macro question, obviously, the relatively slow start to the year in terms of vet clinic visits and, you know, seeing some of the services suggesting numbers are kind of down year over year, just curious how that has impacted overall total lead volumes, whether or not there's been, you know, any impact on conversion rates within your different...
More of a macro question, obviously, the relatively slow start to the year in terms of that clinic visits and seeing some of the services suggested numbers are kind of down year over year. Just curious how that has impacted overall total lead volumes, whether or not there's been.
Any any impact on conversion rates within your different.
Lead channels.
Hum.
In terms of vet visits to mandate the wellness visits that we still are being suppressed in the back half of 'twenty, one yeah that definitely rebounding with thing that bad and people having to make appointments as I'm sure many of us to recognize some weeks and months out, but they're happening we're staying the volume lead volume is absolutely picking back up again across all of our channels not just.
Speaker 7: Hi, it's Margie. In terms of vet visits, the wellness visits that we saw being suppressed at the back half of 21, they're definitely rebounding. We're seeing that people are having to make appointments, as I'm sure many of us recognize, some weeks and months out. But they're happening. We're seeing the lead volume is absolutely picking back up again across all of our channels, not just within vets. The vet, obviously, is the one that really drives the market for us.
Within that but that obviously is the one that really drives the market for us and for the industry in terms of conversion rates and conversion rates are also improving I mentioned before that we've made some adjustments from the way that we're managing conversion thought there's been lots of chances that wish if not correct tests they feel good about ethylene and sinbad.
Speaker 7: and for the industry. In terms of conversion rates, conversion rates are also improving. I mentioned before that we've made some adjustments from the way that we're managing conversions.
Speaker 7: spotted some opportunities there which we've now corrected, so feel good about those lead-ins in BERT. It doesn't mean that the work stops there, we've got a lot still to do, but feel happy about the momentum we have going into the rest of the course.
It doesn't mean that the wax ups that we've got a lot still today, but feel happy about the momentum we have going into the rest of the quarter.
Okay, and then just last question.
Speaker 13: And just last question, with respect to overall vet inflation levels out there, not sure how much variation you're seeing by market, but wondering if you're seeing any noticeable changes in terms of the buckets that you sort of highlighted.
With respect to your overall debt inflation levels out there not.
I'm not sure how much variation youre seeing by market, but wondering if you're seeing any noticeable changes in terms of the buckets that you sort of highlighted previously in terms of distribution and how in pricing increases may in fact impact your your business basically.
Speaker 13: previously in terms of distribution and how pricing increases may, in fact, impact your business. I'm basically looking to see if perhaps there's been a disproportionate increase in the market
Looking to see if may perhaps there's been a disproportionate increase in the AR and.
And the.
Pricing bucket with greater than 20% overall inflation.
Speaker 13: pricing bucket with greater than 20% overall inflation.
Yeah. This is Chris I would say you know in general like I mentioned, you know behind the scenes there there is.
Speaker 3: Yeah, this is Trisha. I would say, you know, in general, like I mentioned, you know, behind the scenes there, there is
Relatively large variation and you know cost of care prices coming through utilization of care and then also there's been you know some of the COVID-19 impact in certain areas more more than others and so we do see variability also like I'd mentioned we.
Speaker 3: relatively large variation in, you know, cost of care, prices coming through, utilization of care, and then also there's been, you know, some of the COVID impacts in certain areas more than others.
Speaker 3: So we do see variability, you know also like I mentioned we've had certain areas
You have certain areas, where we haven't been priced as accurately as we could have been and we push through decreases to get closer to our value proposition, which which then should allow for more equal increases that's in it.
Speaker 3: where we haven't been priced as accurately as we could have been, and we push through decreases to get closer to our value proposition.
Speaker 3: uh... which which then should allow for you know more equal increases if an increase is needed in the future as opposed to whip sawing people around so i mean in general i would say
<unk> is needed in the future as opposed to whip sign people around so I.
I mean in general I would say.
We're getting better at not as many members needing to fall into the very large price increase bucket as we get more and more granular that being said is we're targeting that 71% value proposition at a neighborhood greed age out enrollment level.
Speaker 3: I think we're getting better at not as many members needing to fall into the very large price increase bucket as we get more and more granular. That being said, as we're targeting that 71 percent value proposition.
Speaker 3: at a neighborhood, breed, age at enrollment level, if we're seeing the information come through that necessitates that, we will push it through because that's the right thing to do at that granular level. So, I think we're getting much, much better, particularly over the past year with, you know, spending more resources on this.
Foreseen information comes through that necessitates that we will push it through because that's the right thing to do at that granular level. So I think we're getting a much much better, particularly over the past year with spending more resources on this.
I'd also say you know area. It's one of the reasons, where we're really pushing to get better at this whether theres, an increase needed or decrease needed. It because we do see you know.
Speaker 3: I would also say, you know, areas, one of the reasons we're really pushing to get better at this, whether there's an increase needed or a decrease needed, is because we do see, you know, growth, messaging, everything comes together better in a particular area when we are more accurately priced.
Our growth in messaging everything comes back together better in a particular area. When we are more accurately price and can have those those smoother increases going forward, yeah, I can answer that as well when we think about specific market then to tricia's point, we're looking across the whole business.
Speaker 3: and can have those smoother increases going forward. Yeah, I can add to that as well. When we think about specific markets and.
Speaker 7: to Trish's point, we're looking across the whole business at a very granular level from end to end in that journey, from pricing to sales to retention and the whole member experience.
At a very granular level from end to end in that journey from pricing to sales to retention and the whole member experience. There is no difference in the price point. If you look at it by dollar amount. The key thing is as attrition mentioned that 71% and that value proposition is critical the ability for our teams to sell.
Speaker 7: There is no difference in the price point if you look at it by dollar amount. The key thing is, as Tricia mentioned, the 71%.
Speaker 7: And that value proposition is so critical. The ability for our team to sell our product and for people to appreciate the value is good. And it doesn't make a difference what that price point is, so long as the value is there in the product.
All our products and for people to appreciate the value is good and it it doesn't make a difference what that price point is so long as the value is there and the product and people understand what that guessing. So there isn't a price sensitivity, but I didn't see that shifting by market. It's all about making sure that product is doing what we set out to do in solving that problem and if we priced accurate anyway.
Speaker 7: And people understand what they're getting so there isn't a price sensitivity. We don't see that shifting by market It's all about making sure the product is doing what we set out to do and solving that problem And if we price accurately we know it can
Counting.
Yeah.
Speaker 4: Yeah, I'll add just one more bit of color.
One more bit of color.
So we have.
Speaker 4: So we have one market, for example, that is double-digit inflation.
One market for example.
That is.
Double digit inflation.
And that market, we've got a high percentage of the hospitals that we're paying directly.
Speaker 4: In that market, we've got a high percentage of hospitals that we're paying directly. That market is in the state of Trutopia, meaning referral and ADEPATs are greater than cancels. In that market, over 40% of new enrollments are coming from referrals, and the growth rate in that market is greater than 30% year over year, and it's a mature market. So when we have the value proposition right, and we've got the right customer...
That market is in the state of Utopia, meaning referral and out of pets are greater than cancel.
And that market over 40% of new enrollments are coming from referrals and the growth rate in that market is greater than 30% year over year, and it's a mature market. So when we have the value proposition right.
And we've got the right customer experience.
We have a.
Speaker 4: We have a perpetual growth machine because we've got such low penetration rates and it's super exciting to see those things.
So a growth machine.
Because we've got such a low penetration rates and I'm.
Super exciting to see those things.
Okay.
Hello.
We're ready for our next question.
Thank you.
So the next question is from Ryan Tunis.
But autonomous research.
Please go ahead.
Hey, Thanks, good evening.
Speaker 6: Thanks. Good evening. First couple questions on the chewy deal.
Couple of questions on the <unk> deal.
From an <unk> perspective is that going to.
Speaker 6: from an ARPU perspective, is that expected to be more kind of like the $44 per month other pet or closer to the 63 that we're seeing in subscription? That's one. And then also, I guess, in anticipation of the Chewy.
Is that expected to be more kind of like the $44 per month, other pad or closer to the 63 that we're seeing in subscription that's one and then also.
In anticipation of the tree.
Partnership launching in the spring is there should we assume youre going to hold back some tax spend potentially for the back half of the year.
Speaker 6: partnership launching in the spring, is there, should we assume you're going to hold back some tax spend potentially for the back half of the year?
Hi, Ron it's muggy, so I can I can kick off with a thought to say they the jewelry products are designed exclusively for T V.
Speaker 7: Hi Ryan, it's Margie. So I can kick off with this answer. So the Chewy products are designed exclusively for Chewy, so the teams are refining the different value proposition, the kind of overall product set. There will be some similar products in there, but we'll be ready to share that more as we go closer to launch. In terms of holding back pack spend,
The teams are finding kind of the different the different value proposition that the the kind of April products that that'll be similar products in the.
He's made but we are ready to share that more as we get closer to launch.
In terms of holding about Pac spend mm.
No we're not when we think about the way the margins the way the business of shapes are not holding back anything here I think kind of a it's going to run the major Hollywood run any other part of the the growth side of the business and when we're thinking about the courtship onion product to I think aflac chewing.
Speaker 7: No, when we think about the margins, the way the business is shaped, we're not holding back anything here. I think it's going to run similarly to how we would run any other part of the growth side of the business. When we're thinking about the core Choupanian product, we're thinking Aflac, Chewy, so we will run within the same IRR guardrails as we have been with the other products and the difference there.
So we will run within the same IRR guardrail since we have been with the other products in a different thing.
Okay.
Got it I guess the reason I asked that question is when do we start thinking about pretty big numbers from Julie.
Speaker 6: Got it. I guess the reason I asked that question is when we start thinking about pretty big numbers from Chewy.
That could seemingly I guess cut into the profit margin that you have.
Speaker 6: that could seemingly, I guess, cut into the profit margin that you.
Reserved for investment in new pets, it's not something you're worried about you think you'll be able to meet that.
Speaker 6: you know, have reserved for investment in new pets. That's not something you're worried about. You think you'll be able to meet that.
Alright.
It is true yeah, we think that would be a good problem to have where we're investing for growth. We have a strong balance sheet and if the returns are there we will we will invest the money.
Speaker 5: This is true. Yeah, we think that would be a good problem to have. We're investing for growth. We have a strong balance sheet, and if the returns are there, we will invest the money.
Got it and then my follow up is just on the guidance you gave for adjusted.
Speaker 6: Got it. And then my follow-up is just on the guidance he gave for adjusted operating income.
Operating income.
Does that contemplate any contribution from chewy or any.
Speaker 6: Does that contemplate any contribution from Chewy or any of the aspects of the...
Many of the aspects of the.
Multi year plan.
Embedded in that guidance is all of the initiatives that we've teed up.
Speaker 5: Yeah, embedded in that guidance is all the initiatives that we've teed up. It just gives us greater confidence around hitting 25% this year and also into our 60 month plan. As we mentioned, it'll ramp up slowly during the year and really impact 2023.
It just gives us greater confidence around.
Hitting 25% this year and also into our 60 month plan as we mentioned it will ramp up slowly during the year and really impact 2023.
Thank you.
Yeah.
Thank you.
Last question is from Greg Gibas with Northland Securities. Please go ahead.
Speaker 2: The last question is from Greg Jabez with Northland Securities, please go ahead.
Hey, thanks for taking the questions.
Speaker 14: Hey, thanks for taking the questions. I think in your prepared comments you talked about the AFLAC partnership beginning to target worksites across North America. I'm wondering if you could just expand on maybe the timeline of that deployment, of the initiative there, and when we might begin to see a financial impact from it.
In your prepared comments you talked about the Aflac partnership beginning to target work sites across North America I'm wondering if you could just expand on maybe the timeline of that deployment of the initiative there and when we might.
This year financial impact from it.
Yeah, sure Hi, Greg So I'll kick off her smoggy in terms of the timing say exciting, but you don't see them that way that next quarter and we are rolling out to a small number. So that's break US. Initially is just again to make sure that way are controlled.
Speaker 7: Yeah, sure. Hi, Greg. So, I'll kick off here. It's Margie. In terms of the athlete timing, so excited to be launching that within this quarter. We are rolling out to a small number of select brokers initially, just again to make sure that we're controlled.
That everything that we are we have built there it's really effective in hunting them and then we will certainly build on that through the rest of it we don't expect or anticipate any meaningful contribution in 2022 as a reminder, the employee benefit space typically has to real chances of enrollment periods. The fast in July and the second in in January .
Speaker 7: that everything that we have built there is really effective and humming and then we will slowly build on that through the rest of this year. We don't expect or anticipate any meaningful contribution in 2022. As a reminder, the employee benefit space typically has two real tranches of enrollment periods, the first in July and the second in January .
And no what I'm, saying at this point in time allows us to really build through that and make sure that we're oh, feeling confident I'll fight remains a an incredibly well aligned partner.
Speaker 7: And so launching at this point in time allows us to really build through that and make sure that we're all feeling confident. Aflac remains an incredibly well-aligned partner. They are a shareholder of Chupanians, and that alignment there really does help make sure that we're checking all the boxes in the right way. They've helped hold our hand through the environment from a worksite perspective. We're running ahead of plan, and we say it's gone very smoothly so far, and we're excited to see where it goes.
They are a shareholder of couponing and not alignment that really does help make sure that we're checking all the boxes in the right way they've helped hold all country the environment from what perspective.
Running ahead of plan and I would say, it's gone very smoothly, so far and we're excited to see where it goes.
Great that's helpful mortgage.
Speaker 14: Great. That's helpful, Margie. And regarding just a follow-up on the increased variable expenses relating to investments in the member experience that you talked about, are those, you know, should we expect that to be kind of recurring or more one-time in nature in Q4?
And regarding and just a follow up on the increased variable expenses relating to investments in the member experience that you talked about are those should we expect that to be kind of recurring or more onetime in nature in Q4.
Yeah, I would say I mean, that's our current run rate with the initiatives that we're seeing are working well and obviously, we don't want to stop doing those initiatives, but anywhere that we can drive our scale.
Speaker 3: Yeah, I would say, I mean, that's our current run rate with the initiatives that we're seeing working well. Obviously, we don't want to stop doing those initiatives, but anywhere that we can drive scale moving forward will be
Going forward will be.
We'll be hoping to do so.
Just wanted to reemphasize you know in Q4, we hit our 15% target margin pretty much right.
Speaker 4: I just want to reemphasize, you know, in Q4, we hit our 15% target margin, pretty much right, right online. In the event that we get any additional savings,
Right online.
In the event that we get any additional savings.
We're gonna be planning on giving those savings back to the consumer and having a better value proposition. So for those modeling the business. What's most important to model is that 15% margin.
Speaker 4: We're going to be planning on giving those savings back to the consumer and having a better value proposition.
Speaker 4: So, for those modeling the business, what's most important to model is that 15% margin. And the higher percentage we can give back to the consumer is only going to help retention rate, referral rate.
And the higher percentage, we can get back to the consumer and it's only going to help retention rate referral rates are and our lifetime value of a pad, which then allows us to spend more money to acquire pets. So we're.
Speaker 4: and our lifetime value of a pet, which then allows us to spend more money to acquire pets. So we're not trying to get margin expansion from 15 to 16. We said years ago that was our target. We said in our opening remarks that we've been narrowing around that four of the last eight quarters. In Q4, a time when people were concerned about inflation, we hit it perfectly.
We're not trying to get margin expansion from 15 to 16, we said years ago that was our target. We said in our opening remarks that we've been narrowing around that four of the last eight quarters in Q4 at a time when people were concerned about inflation, we hit it perfectly.
And we balance between customer experience in paying hospitals directly 24, seven and trying to give as much back to the customer as we can.
Speaker 4: You know, we balance between customer experience and paying hospitals directly 24-7 and trying to give as much back to the customer as we can.
Great helpful. Daryl.
Speaker 14: Great. Helpful, though. I guess if I could sneak in a last one, I noticed you didn't address your pet food offering. Any developments there along that initiative?
I guess, if I could sneak in a last one I noticed you didn't address your pet food offering.
Any developments there along that initiative.
Still testing.
Speaker 4: Still testing. We're excited about it. We think it could be a great initiative and the data that we have around our business we think can be very supportive. But we're still trying to fine-tune things. We're not doing any product launches. We're not doing anything with consumers yet, so it's all behind the scenes.
We are.
We're excited about it we think it can be a you know.
A great initiative and the data that we have around our business. We think can be very support of but we're still are still trying to fine tune things, where we're not doing any product launches, we're not doing anything with consumers yet so that's all behind the scenes.
Okay I appreciate it.
Thank you.
Speaker 2: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. You may disconnect your...
Ladies and gentlemen, we have reached the end of the question and answer fishing.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Yeah.
Yes.