Q1 2025 Trupanion Inc Earnings Call

Unknown Executive: Good day and welcome to the Trupanion first quarter 2025 earnings conference call.

Good day and welcome to the two Banyan first quarter 'twenty 25 earnings Conference calls.

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Gil Melchior: I would now like to turn the conference over to Gil Melchior, Director of Investor Relations. Please go ahead.

Gil: I would now like to turn the conference over to Gil <unk> Director of Investor Relations. Please go ahead.

Margaret Tooth: Good afternoon and welcome to Trupanion's first quarter 2025 financial results conference call. Participating on today's call are Margie Tooth, Chief Executive Officer and President, and Fawwad Qureshi, Chief Financial Officer. For ease of reference, we've included a slide presentation to accompany today's discussion, which will be made available on our Investor Relations website under our Quarterly Earnings tab.

Gil: Good afternoon, and welcome to Japans first quarter 'twenty 'twenty five financial results conference call participating on today's call are Moggy to Chief Executive Officer and President.

Qureshi: And for what Qureshi Chief Financial Officer.

Qureshi: For ease of reference we think through a slide presentation to accompany today's discussion, which will be made available on our investor Relations website on the quarterly earnings tab.

Margaret Tooth: Before we begin, please be advised that remarks today will contain forward-looking statements. All statements other than statements of historical facts are forward-looking statements. These include, but are not limited to, statements regarding our future operations, key operating metrics, opportunities and financial performance, pricing, and veterinary industry inflation. These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed.

Qureshi: Before we begin please be advised that remarks today will contain forward looking statements.

Qureshi: All statements other than statements of historical facts are forward looking statements.

Qureshi: These include but are not limited to statements regarding our future operations key operating metrics opportunities and financial performance pricing and veterinary industry inflation.

Qureshi: These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed a detailed discussion of these and other risks and uncertainties are included in today's earnings release as well as the Companys. Most recent reports, including forms 10-K, 10-Q, and 8-K filed with the six.

Margaret Tooth: A detailed discussion of these and other risks and uncertainties are included in today's earnings release, as well as the company's most recent reports, including Form 10-K, 10-Q, and 8-K, filed with the Securities and Exchange Commission.

Qureshi: Parity and exchange Commission.

Margaret Tooth: Today's presentation contains references to non-GAAP financial measures that management uses to evaluate a company's performance, including without limitation, cost of paying veterinary invoices, variable expenses, fixed expenses, adjusted operating income, acquisition costs, internal rate of return, adjusted EBITDA, and pre-cash flow. When we use the term adjusted operating income or margin, it is intended to refer to a non-GAAP operating income or margin before new pet acquisition and development expenses. Unless otherwise noted, all margins and expenses will be presented on a non-GAAP basis, and excluding 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.

Qureshi: Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation cost of paying veterinary invoices variable expenses fixed expenses adjusted operating income acquisition cost internal rate of return adjusted EBITDA and free cash flow.

Qureshi: 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 and development expenses.

Qureshi: Unless otherwise noted all margins and expenses will be presented on a non-GAAP basis, excluding stock based compensation expense and depreciation expense.

Qureshi: These non-GAAP measures are in addition to another substitute for measures of financial performance prepared in accordance with U S. GAAP.

Margaret Tooth: GAAP.

Margaret Tooth: 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.

Qureshi: 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.

Margaret Tooth: Lastly, I would like to remind everyone that today's conference call is also available via webcast on Trupanion's Investor Relations website. A replay will also be available on the site.

Qureshi: Lastly, I would like to remind everyone that todays conference call is also available via webcast on <unk> Investor Relations website, a replay will also be available on the site.

Margaret Tooth: I will now hand over the call to Margaret. Good afternoon, everyone. It's a pleasure to be with you today to discuss our first quarter results. The year is off to a strong start and I'm pleased to report overachievement on both total revenue and total adjusted operating income in the quarter. Most notable was the increase in our subscription-adjusted operating income, which increased 53% year-over-year to over $30 million. Across the business we executed to, or better than, plan with the delivery of steady improvements across key financial metrics and continued advancements in operating efficiencies in critical areas of the business.

Qureshi: I'll now hand over the call Tomorrow.

Speaker Change: Good afternoon, everyone. It's a pleasure to be with you today to discuss our first quarter results.

Speaker Change: The year is off to a strong start and I'm pleased to report ever achieved on both total revenue and total adjusted operating income in the quarter.

Speaker Change: Most notable was the increase in our subscription adjusted operating income, which increased 53% year over year do you like the $30 million.

Across the business, we executed two or better than plan with the delivery of steady improvements across key financial metrics and continued advancement and operating efficiencies in critical areas of the business.

Margaret Tooth: Within our core subscription business, revenue was $233 million, up 16% year-over-year. The majority of this growth was driven by increases in average revenue per pet, reflecting the pricing actions we've taken over the past two years, and a modest additional lift from growth in enrolled pets. Our meaningful step-up in Subscription Adjusted Operating Income was driven by two key components, an improving loss ratio and efficiencies operationally. We made continued progress toward our annual target value proposition with a substantial year-over-year increase of 350 basis points, ending the quarter at 71.8%. This, coupled with efficiencies stemming from our transition to our internal technology platform, Vision, has enabled some solid operational gains, allowing us to lower invoice processing costs while enhancing the member experience and reducing overall variable expenses.

Speaker Change: Within our core subscription business revenue was $233 million up 16% year I began the.

Speaker Change: The majority of this growth was driven by increases in average revenue per pet, reflecting the pricing actions, we've taken over the past two years and a modest additional lift from grace and enrolled pets.

Speaker Change: A meaningful step up in subscription adjusted operating income was driven by two key components and improving loss ratio and efficiencies operationally.

Speaker Change: We made continued progress towards our annual target value proposition with a substantial year over year increase of 350 basis points and then of course that at 71, 8%.

Speaker Change: This coupled with efficiencies stemming from our transition to our internal technology platform vision has enabled some solid operational games, allowing us to lower invoice processing costs, while enhancing the member experience and reducing April variable expenses.

Margaret Tooth: Since its rollout, we've brought claims inventory to near record lows and meaningfully increased both the speed and frequency of invoice payments. As a monthly recurring revenue business, member retention is critical to our long-term sustainable growth. In Q1, reported monthly average retention improved quarter-on-quarter for the first time in 12 quarters to 98.28%. This sequential uptick was largely driven by improvements within our core Trupanion product, especially among members who received rate increases greater than 20%. These rate changes were not taken lightly, they reflect a focused response to the rising cost of veterinary care and a commitment to maintaining long-term sustainability.

Speaker Change: Since its rollout we broke claims inventory to near record lives and meaningfully increase the speed and frequency of invoice payments.

Speaker Change: As a monthly recurring revenue business member retention is critical to our long term sustainable growth.

Speaker Change: In Q1 reported monthly average retention improved quarter on quarter for the first time in 12 courses to 98.28%.

Speaker Change: The sequential uptick was largely driven by improvements within our core she pinion product, especially among members he received rate increases greater than 20%.

Speaker Change: These rate changes were not taken lightly they reflect a focus response to the rising cost of veterinary care and a commitment to maintaining a long term sustainability.

Margaret Tooth: Worth noting, while reported cost trends across the broader animal health industry suggest some pricing moderation, the costs we observe within our own book remain largely in line with our expectations. We continue to monitor trends very closely and partner with others across the industry to stay informed and to react as needed. That said, it's important to highlight that the Trupanion experience is fundamentally different. Our members visit the veterinarian more frequently and are more likely to follow the veterinarian's recommended treatment, which naturally results in a high use of our product. Trupanion's cost of care has consistently indexed above the CPI norm for these reasons.

Speaker Change: Well, it's no, saying well reported cost trends across the broader animal health industry suggestion pricing moderation the costs, we observed within all aimed at remain largely in line with our expectations. We continue to monitor trends very closely I'm, calling them with others across the industry to stay informed and react just needed that.

Speaker Change: That said, it's important to highlight that the Japan and experience is fundamentally different.

Speaker Change: Our members visit the veterinarian more frequently and are more likely to find the best scenario recommended treatment, which naturally results in a high use of our product.

Speaker Change: Japan names cost of Cat has consistently index above the C. P. I know them for these reasons.

Margaret Tooth: Looking ahead, with the majority of pet parents transitioning out of our highest rate cohorts and into more stable pricing tiers, we will be placing even more emphasis on the early stage member experience. With this in mind, we've adjusted our pet acquisition investment to add resources and realigned our marketing structure to better integrate acquisition and retention. We're also expanding the use of our patented Vet Portal, which supports real-time payments directly to the veterinary hospital, helping members avoid out-of-pocket costs while pursuing optimal treatment solutions for their pets. With the average subscription pet staying with us for 58 months, there is a long way to go to return to our historical average retention rate, yet I am encouraged by our work on this front and its potential impact on member experience over time.

Speaker Change: Looking ahead with the majority of pet parents transitioning out of our highest rate K hearts and into more stable pricing chance, we will be placing even more emphasis on the early stage member experience.

Speaker Change: With this in mind, we've adjusted our pet acquisition investment to add resources and realigned our marketing structure to better integrate acquisition and retention.

Speaker Change: We're also expanding the use of our patented Matt torso, which supports real time payments directly to the battery hospital, helping members avoid out of pocket costs, while pursuing optimal treatment durations that I pass.

Speaker Change: What are the average subscription pets staying with us for 58 months. There is a long way to go to return to our historical average retention rate yet I'm encouraged by our work on this front and its potential impact on member experience over time.

Margaret Tooth: Retention is a significant growth catalyst, new pet acquisition is another, and here too we're quite pleased with our results. Pet acquisition investment, which is fueled by the healthy expansion in our adjusted operating income, increased 18% year-over-year in this first quarter and held between our guardrails at 31% internal rate of return. We saw a sequential increase in gross pet additions for the core Trupanion product, the direct benefit of compounding our investment in pet growth sequentially for the last three quarters. Disciplined acquisition spend, especially within our efficient veterinary channel, remains a priority, ensuring we maximize return on each dollar invested.

Speaker Change: Retention is a significant growth catalyst new pet acquisition is another and here too we're quite pleased with our results.

Speaker Change: Pet acquisition investment, which is fueled by the healthy expansion in our adjusted operating income increased 18% year over year in this past quarter and held between our guardrails at 31% internal rates of return.

We saw a sequential increase in gross consultations for the coach Japan and product the direct beneficiary of compounding our investment impact growth sequentially for the last three quarters.

Speaker Change: Disciplined acquisition spend, especially within our efficient factory channel remains a priority ensuring we maximize return on each dollar invested.

Margaret Tooth: The average profit per Trupanion pet was up 46% year-over-year, reflecting improved margins from focused pricing action and cost efficiency. This growth in profitability, combined with stable retention, gives us even greater flexibility to reinvest in high-quality growth opportunities in our large and underpenetrated addressable market, which is something discussed at length in this year's shareholder letter. When our PACT appointment moves in line with our adjusted operating income growth, we see parallel growth curves, an encouraging demonstration of the flywheel of our business. The combination of stronger retention and improved pet ads contributed to our first meaningful sequential increase in net pet addition in two years.

Speaker Change: The average profit patchy upon impact was about 46% year over year, reflecting improved margins from focus pricing action and cost efficiencies.

Speaker Change: This growth and profitability combined with stable retention gives us even greater flexibility to reinvest in high quality growth opportunities and our large and underpenetrated addressable market, which is something discussed at length in this year's shareholder letter.

Speaker Change: When I talk to appointment maybe is in line with our adjusted operating income growth, we see parallel grace cabs and encouraging demonstration of the flywheel of our business.

Speaker Change: The combination of stronger attention unimproved pass ads contributed to our first meaningful sequential increase in that penetration into yes.

Margaret Tooth: In summary, Q1 was a strong start to the year. Performance is tracking largely ahead of our expectations. We're growing the dollars available for reinvestment and are beginning to see a return to growth in new pets. will continue to focus on the levers we can control, doubling down on member experience, operating efficiency and disciplined growth. As we look to the future, we are mindful of the broader macro environment. It is at times such as these that Trupanion comes into its own. We are designed to support pet parents during times of uncertainty and we have proven time and again the resilience of our business model.

Speaker Change: In summary, Q1 was a strong start to the year performance is tracking largely ahead of our expectations. We're growing the dollars available for reinvestment and are beginning to see a return to growth in new paths.

Speaker Change: We will continue to focus on the levers we can control doubling down our member experience operating efficiency and disciplined growth.

Speaker Change: As we look to the future we're mindful of the broader macro environment. It is at times such as these that you're kind of comes into it saying we are designed to support pet parents during times of uncertainty and we've proven time and again the resilience of our business model.

Margaret Tooth: Q1 was an encouraging indication that our strategy is working and we look forward to building on our progress in the months and quarters ahead.

Speaker Change: Q1 was an encouraging indication that our strategy is working and we look forward to building on our progress in the months and quarters ahead.

Margaret Tooth: Before handing it over to Fawwad, I'd like to briefly refer you to our recently published shareholder letter, which can be found on our IR website. I've referenced it during this call and for good reason. It includes a comprehensive review of our 2024 performance, key strategic updates, and a deeper dive into some of the more nuanced elements of our business.

Speaker Change: Before handing it over to you for what I'd like to briefly refer you to a recently published shareholder letter, which can be found on our IR website I've referenced that during this call and for good reason. It includes a comprehensive review of our 2024 performance key strategic updates and a deeper dive into some of the more nuanced elements of our business.

Fawwad Qureshi: With that, I'll hand the call over to Fawwad. Thanks, Margie. And good afternoon, everyone. Today, I will share additional details around our first quarter performance as well as provide our outlook for the second quarter and full year 2025. Total revenue for the quarter was $342 million, up 12% year-over-year. Within our subscription business, revenue was $233.1 million, up 16% year over year, and up 18% on a constant currency basis. Total monthly average revenue per pet for the quarter was $77.53, up 11% over the prior year period. As expected, ARPU for our core Trupanion brand expanded faster at 12% year-over-year and 13% on a constant currency basis.

Speaker Change: With that I'll hand, the call over just for what.

Speaker Change: Thanks, Marty and good afternoon, everyone today, I will share additional details around our first quarter performance as well as provide our outlook for the second quarter and full year 2025.

Speaker Change: Total revenue for the quarter was $342 million up 12% year over year.

Speaker Change: Within our subscription business revenue was $233 1 million up 16% year over year and up 18% on a constant currency basis.

Speaker Change: Total monthly average revenue per pet for the quarter was $77 53 up 11% over the prior year period.

Speaker Change: As expected our pool for our court and in brand expanded faster at 12% year over year and 13% on a constant currency basis.

Fawwad Qureshi: Total subscription pets increased 5% year over year to approximately 1,053,000 pets as of March 31st. This includes over 54,000 pets in Europe, a majority of which are currently underwritten through an MGA structure. Average monthly retention for the trailing 12 months for all subscription pets was 98.28% down versus Q1 last year, which was 98.41%, but up sequentially from Q4, which was 98.25%. The subscription business cost of paying veterinary invoices was $167.4 million, resulting in a value proposition of 71.8%, a healthy improvement from 75.3% in the prior year period, and particularly impressive given the higher seasonality that our invoice costs generally experienced during the first half of the year.

Speaker Change: Total subscription pets increased 5% year over year to approximately 1.053 million pets as of March 31st. This includes over 54000 pets in Europe, a majority of which are currently underwritten through an MGA structure.

Speaker Change: Average monthly retention for the trailing 12 months for all subscription pets was 98.28% down versus Q1 last year, which was 98.41%, but up sequentially from Q4, which was 98.25%.

Speaker Change: The subscription business cost of paying veterinary invoices was $167 4 million, resulting in a value proposition of 71, 8% a healthy improvement from 75, 3% in the prior year period, and particularly impressive given the higher seasonality that our invoice cost generally experienced during.

Speaker Change: The first half of the year.

Fawwad Qureshi: The drivers of this improvement were margin expansion from our ongoing pricing actions and continued efficiency in our cost of processing. These improvements more than offset adverse development from prior periods in the quarter, totaling 1.7 million, or approximately 70 basis points of revenue. Assuming cost of care continues to trend in line with our expectations, we anticipate the pace of year-over-year margin expansion will moderate as our pricing and claims experience become more closely aligned. As a percentage of subscription revenue, variable expenses were 9.1% down from 9.6% a year ago. The primary driver of this improvement has been the strong performance of our claims and contact center team.

Speaker Change: The drivers of this improvement were margin expansion from our ongoing pricing actions and continued efficiency in our cost of processing invoices. These.

Speaker Change: These improvements more than offset adverse development from prior periods in the quarter totaling $1 7 million or approximately 70 basis points of revenue.

Speaker Change: Assuming cost of care continues to trend in line with our expectations, we anticipate the pace of year over year margin expansion will moderate as our pricing and claims experience become more closely aligned.

Speaker Change: As a percentage of subscription revenue variable expenses were nine 1% down from nine 6% a year ago. The primary driver of this improvement has been the strong performance of our claims and contact center teams supported by the technology and operating investments we have made.

Fawwad Qureshi: Supported by the technology and operating investments we have Fixed expenses as a percentage of revenue were 6.2%, up from 5.3% in the prior year period, in line with our expectations. The largest driver of this change was an increase in our Canadian underwriting fees that we highlighted last quarter. Our expectation is that we will see expense leverage throughout the year as we transition to our wholly owned underwriting entity for our Canadian clients. Our subscription business delivered adjusted operating income of $30 million, an increase of 53% from last year, and contributed over 96% of our total AOI for the quarter.

Speaker Change: Fixed expenses as a percentage of revenue were six 2% up from five 3% in the prior year period in line with our expectations.

Speaker Change: The largest driver of this change was an increase in our Canadian underwriting fees that we highlighted last quarter.

Speaker Change: Our expectation is that we will see expense leverage throughout the year as we transition to our wholly owned underwriting entity for our Canadian business.

Speaker Change: Our subscription business delivered adjusted operating income of $30 million, an increase of 53% from last year and contributed over 96% of our total ally for the quarter.

Fawwad Qureshi: Subscription Adjusted Operating Margin was 12.9% of subscription revenue. This is up from 9.7% in the prior year, and represents approximately 320 basis points of margin expansion.

Speaker Change: Subscription adjusted operating margin was 12, 9% of subscription revenue. This is up from nine 7% in the prior year and represents approximately 320 basis points of margin expansion.

Fawwad Qureshi: Now I'll turn to our other business segment, which is comprised of revenue from other products and services that have a lower margin profile than our subscription. Our other business revenue was $108.9 million for the quarter, an increase of 4% year-over-year.

Speaker Change: Now I'll turn to our other business segment, which is comprised of revenue from other products and services that have a lower margin profile than our subscription business.

Speaker Change: Our other business revenue was $108 9 million for the quarter, an increase of 4% year over year, we expect growth for this segment to continue to decelerate as we are no longer enrolling new pets and the majority of the U S States for our largest partner Pet's best.

Fawwad Qureshi: We expect growth for the segment to continue to decelerate as we are no longer enrolling new pets in the majority of U.S. states for our largest partner, PetsVet. Adjusted Operating Income for this segment was $1.2 million. Adjusted Operating Margin for this segment was 1.1%, down from 1.6% last year. The lower margin was a result of higher fixed expenses offset to some extent by higher gross margin.

Speaker Change: Adjusted operating income for this segment was $1 2 million adjusted operating margin for the segment was 1.1% down from 1.6% last year.

Speaker Change: The lower margin was a result of higher fixed expenses offset to some extent by higher gross margins.

Fawwad Qureshi: In total, Adjusted Operating Income was $31.2 million in Q1, up 46% from Q1 last year, and above our expectations. We deployed $17.6 million of this AOI to acquire approximately 63,700 new subscription paths. Excluding the pets that are underwritten through an MGA structure, this translated into an average pet acquisition cost of $267 per pet in the quarter, up from $207 in the prior year period. The estimated internal rate of return on this spend was 31% in the quarter. We also invested $1.4 million in the quarter in development costs. Stock-based compensation expense was $9.5 million in the quarter.

Speaker Change: In total adjusted operating income was $31 2 million in Q1 up 46% from Q1 last year and above our expectations.

Speaker Change: We deployed $17 6 million of this ally to acquire approximately 63700, new subscription pets excluding.

Speaker Change: Excluding the pets that are underwritten through an MGA structure. This translated into an average pet acquisition costs of $267 per pet in the quarter up from $207 in the prior year period.

Speaker Change: The estimated internal rate of return on the spend was 31% in the quarter.

Speaker Change: We also invested $1 4 million in the quarter and development costs stock based compensation expense was $9 5 billion in the quarter.

Fawwad Qureshi: As a result, net loss for the quarter improved to $1.5 million, or $0.03 per basic and diluted share from a net loss of $6.9 million, or $0.16 per basic and diluted share in the prior year period. In terms of cash flow, operating cash flow was $16 million in the quarter compared to $2.4 million in the prior year period. Capital expenditures totaled $1.9 million, down from $3.1 million in Q1 last year.

Speaker Change: As a result net loss for the quarter improved to 1.5 billion or three cents per basic and diluted share from a net loss of $6 9 million or 16 cents per basic and diluted share in the prior year period.

Speaker Change: In terms of cash flow operating cash flow was $16 million in the quarter compared to $2 4 million in the prior year period capital expenditures totaled $1 9 million down from $3 1 million in Q1 last year.

Fawwad Qureshi: As a result, free cash flow was $14 million, up from approximately break-even in the prior year's first quarter.

Speaker Change: As a result free cash flow was 14 million up from approximately breakeven in the prior year's first quarter.

Fawwad Qureshi: We ended the quarter from a position of financial strength with $321.8 million in cash and short-term Now I'll turn to our outlook. While we cannot predict the future, especially during these uncertain times, the recurring nature of our business model provides us with a higher degree of visibility into our future performance than most. For the full year of 2025, we are increasing our guidance to account for Q1 overperformance, as well as favorable conversion rates. We now expect total revenue in the range of $1.39 billion to $1.425 billion. We now expect subscription revenue in the range of $966 million to $989 million, representing approximately 14% year-over-year growth at the mid-term.

Speaker Change: We ended the quarter from a position of financial strength with $321 8 million in cash and short term investments.

Speaker Change: Now I'll turn to our outlook, while we cannot predict the future, especially during these uncertain times the recurring nature of our business model provides us with a higher degree of visibility into our future performance than most.

Speaker Change: For the full year of 2025, we are increasing our guidance to account for Q1 over performance as well as favorable conversion rate movements.

Speaker Change: We now expect total revenue in the range of 1.39 billion to 1.425 billion.

Speaker Change: We now expect subscription revenue in the range of 966 million to 989 million, representing approximately 14% year over year growth at the midpoint.

Fawwad Qureshi: We now expect total adjusted operating income to be in the range of $122 million to $142 million, or 15% year-over-year growth at the midpoint. For the second quarter of 2025, total revenue is expected to be in the range of $344 million to $350 million. Subscription revenue is expected to be in the range of $238 million to $241 million, representing approximately 15% year-over-year growth at the midpoint. Total Adjusted Operating Income is expected to be in the range of $27 million to $30 million. This represents approximately 15% growth year-over-year at the mid-year.

Speaker Change: We now expect total adjusted operating income to be in the range of 122 million to $142 million or 15% year over year growth at the midpoint.

Speaker Change: For the second quarter of 2025 total revenue is expected to be in the range of 344 million to $350 million.

Speaker Change: Subscription revenue is expected to be in the range of 238 million to 241 million, representing approximately 15% year over year growth at the midpoint.

Speaker Change: Total adjusted operating income is expected to be in the range of 27 million to $30 million. This represents approximately 15% growth year over year at the midpoint.

Fawwad Qureshi: As a reminder, our revenue projections are subject to conversion rate movements, predominantly between the U.S. and Canadian. For our second quarter and full year guidance, we used a 72% conversion rate in our...

Speaker Change: As a reminder, our revenue projections are subject to conversion rate movements predominantly between the U S and Canadian currencies for our second quarter and full year guidance, we used a 72% conversion rate in our projections.

Margaret Tooth: Let me now pass it back to Mark. Thank you, Fawwad.

Marty: I'll pass it back to Marty.

Marty: Thank you for what before we place I'm pleased to announce that we will be hosting our investor day again this year on September 17th at our headquarters in Seattle, Washington.

Margaret Tooth: Before we close, I'm pleased to announce that we'll be hosting our Investor Day again this year on September 17th at our headquarters in Seattle, Washington. This annual event is a great deep-dive opportunity for investors to hear directly from team members leading the execution of our 60-month plan in an open Q&A forum.

Marty: This annual event is a great deep dive opportunity for investors to hear directly from team members, leading the execution of our 60 month plan and open Q&A Forum.

Margaret Tooth: More immediately, in just two days' time, on Saturday, May 3rd, Fawwad and I will be in Omaha for our annual investor Q&A to follow Berkshire Hathaway's annual shareholder meeting. This is an event I personally look forward to every year and one that presents a unique opportunity to meet with many long-term minded investors in a highly informative setting. We hope to see many of you there.

Marty: More immediately in just two days time on Saturday may 3rd for what and I will be in Omaha for our annual Investor Q&A, just a light Berkshire Hathaway's annual shareholder meeting.

Marty: This is an event I personally look forward to every year, one that presents a unique opportunity to meet with many long term minded investors in a highly informative assessing we hope to see many of you that information and registration for both events can be found on our Investor Relations website.

Margaret Tooth: Information and registration for both events can be found on our Investor Relations website.

Margaret Tooth: Finally, I'd like to close by reaffirming the solid results in the quarter. We achieved what we set out to do, and we go into the rest of the year with a healthy tailwind of strong adjusted operating income, levelling of member rate increases, improved retention and an encouraging step up in PETAs.

Marty: Finally, I'd like to close by reaffirming the solid results in the quarter, we achieved what we set out to do and we go into the rest of the year with a healthy tailwind of strong adjusted operating income leveling a member rate increases improved retention and an encouraging step up and pass apps.

Unknown Executive: And with that, we'll open it up to questions. Thank you. We will now begin the question and answer session. To ask a question, please press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. A request to all the participants, please restrict yourselves to one question and one follow-up.

Marty: And with that well open it up to questions.

Thank you.

Marty: We will now begin the question and answer session.

Marty: To ask a question. Please press Star then one on your telephone keypad.

Marty: If youre using a speakerphone please pick up your handset before pressing the keys.

Marty: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Marty: Okay.

Speaker Change: Our request to all the participants please restrict yourself to one question and one follow up.

Unknown Executive: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Brandon Vazquez: Our first question comes from Brandon Vazquez from William Blair, please go ahead. Yeah, thank you for the question, Brandon. I would say as we've gone through the quarter, we've been monitoring things, as you can imagine, from a cost perspective and also performance overall, just to make sure that we're well on track. So far, we are seeing no changes in terms of what we're expecting. We are seeing strongly volume continuing to come through the vet traffic. I think in Q1, there was a tiny bit down in February, which is somewhat consistent with what we've heard in the macro environment from animal health in general.

Speaker Change: Our first question comes from Brandon Vazquez from William Blair. Please go ahead.

Speaker Change: Hi, everyone.

Brandon Vazquez: Hi, everyone. Congrats on the quarter and thanks for taking the question I guess I'll start with one near term first one and a follow up on a on a bigger picture one but.

Brandon Vazquez: One thing obviously on everyone's mind now is are you guys seeing any notable changes after Q1 ever since the macro noise that we've seen in April talked to us a little bit how the business is maybe trending if youre seeing anything around.

Brandon Vazquez: Inflation changes or retention rate changes or conversion trend changes anything like that you could give us would be helpful.

Speaker Change: Yeah. Thank you for the question Brandon I was saying as we've gone through the course that we've been launching things as you can imagine from a cost dispatch of announced high performance type of role just said to make sure that we're well on track. So far we are saying no changes in terms of what we're expecting we are seeing strong lead volume continuing to come to the VAT in traffic I think Ken and Keith.

Speaker Change: One there was a tiny bit down in February which is somewhat consistent with what we've had in the macro environment from animal health in general that picked up again in March say Q1, and did exactly what we expected in Q2 is continuing in the same vein say didn't lead volume lots of opportunity ahead with converge and we havent seen it tangram dip down we're seeing strength, there and we're seeing even more strength coming to your attention.

Margaret Tooth: That picked up again in March. So Q1 ended exactly where we expected, and Q2 is continuing in the same vein. So good lead volume, lots of opportunity ahead with conversion. We haven't seen it tank. We haven't seen it dip down. We've seen strength there, and we've seen even more strength coming through retention. So we feel good about that too. So nothing is yet and continuing as expected.

Speaker Change: So we feel good about that so nothing nothing as yet and continuing as expected.

Unknown Executive: Great.

Margaret Tooth: And maybe as a follow-up, Margie, in the annual letter you had, there were some slides in there, some details around different conversion rates in different territories. So it sounds like you guys have done a lot of analysis there on kind of how you can close the gap in the quote-unquote underperforming conversion territories. So talk to us a little bit now as you're redeploying more PAC spend, how do you kind of get all of these conversion territories to close the gap to perform higher? And then just in general, where are these PAC spend dollars going to continue to improve ads through the year?

Speaker Change: And maybe as a follow up Marty in the annual letter you had there were some slides and there are some details around different conversion rates in different territories. So it sounds like you guys have done a lot of analysis there on kind of how you can close the gap in the quote unquote underperforming conversion territories, so talk to us a little bit now as you.

Speaker Change: We're redeploying more Pac spend how do you kind of get all of these conversion territories to close the gap to perform higher and then just in general where are these pac spend dollars going to continue to improve adds through the year. Thanks.

Margaret Tooth: Thanks. Right, yeah, when we think about conversion, the reason we included that chart is really to help show the dynamic between more mature markets, some that are newer, some that have got different mixes in terms of media spend. So those particular markets were across the board in North America. We treat every single one of them as an independent territory, they're all led by a territory partner. And we work with the territory partner to understand more about the lead volume coming through the channel. So is it coming from VET? Is it coming from Breeder? And then we look dovetailing into that, how do you convert that pet parent through?

Speaker Change: Right, Yeah, when we think about conversion and the reason we included that chart is really to help show the dynamic between more mature market. Some that are in the U S that have got different mixes in terms of media spend so that is particular markets where across the board in North America. We treat every single one of them is an independent territory, all led by Hitachi partner and we work with.

Speaker Change: Hi, Archie opponents, you understand more about the lead volume coming through that channel. So is it coming from that is it coming from Brita and then we'd okay and dovetailing into that how do you convert that pet parents free so what we're looking at doing is making sure people understand specifically what is different about your opinion and that's the case, regardless wherever you are it helps more when you.

Margaret Tooth: So what we're looking at doing is making sure people understand specifically what is different about Trupanion. And that's the case regardless, wherever you are. It helps more when you have a higher referral rate from the VET channel, naturally, because that's something that people, they lean into the endorsement from the white coat. And for us, then it's really a question of understanding if you're in a rural US area versus a metropolitan Canadian area, you've got very different messaging. So really being very centric to the location where the lead is coming from, helping to address the needs of that specific pet parent at that moment.

Speaker Change: Have a higher rent you have a high referral rates from the bank channel naturally because that's something that people aiming into the endorsement from the the white case and for US and it's really a question of understanding if you're in a rural you asked ariovistus Metropolitan Canadian area, you've got very different messaging, so really being very centric to the location.

Speaker Change: Whether it is coming from helping to address the needs of that specific pet parent at that moment. It's different if you have a cat versus a dog or a lava jato versus New York City area. So, it's very granular and hopefully they'll actually can buy some of the ways in which we think about that but each time, regardless of the conversion rate. We see we are always eating into that in China, Rachel per ton, which mean.

Margaret Tooth: And it's different if you have a cat versus a dog or a Labradoodle versus a Yorkshire Terrier. So it's very granular and hopefully the letter conveys some of the ways in which we think about it. But each time, regardless of the conversion rate we see, we are always leaning into that internal rate of return, which means you can do more in some markets and less in others because the lifetime value will be different. And that's the beauty and also the complexity of how we grow the business. But over the course of the next few months, I'm incredibly pleased with the fact that we've seen that adjusted operating income come up.

Speaker Change: You can do even more in some markets unless another because the lifetime value will be different I'm, not saying, that's a D C and and also the complexity of how we grow the business, but over the course of the next few months I'm incredibly pleased with the fact that we have seen that adjusted operating income come up it gives us a lot more fuel to do the testing to push harder on to see that growth come through which makes.

Margaret Tooth: It gives us a lot more fuel to do the testing, to push harder, and to see that growth come through, which we expect to see the back half of the year. Thank you.

Speaker Change: Is that just in the back half of the year.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Yeah.

John Block: The next question comes from John Block from Stiefel. Please go ahead. Great. Thanks, guys, and good afternoon.

Jon Block: The next question comes from Jon Block from Stifel. Please go ahead.

Jon Block: Great. Thanks, guys and good afternoon.

Margaret Tooth: Margie, maybe the first one, if you could just talk about the move away from Accelerant in terms of the underwriter that was in the filing and maybe what that means for the company, what it means, Fawwad, this one might be for both of you guys, what it means from a capital perspective needed to underwrite these pets and just how we should think about that throughout 2025. Yeah, I can kick that off, John and hand over to Fawwad. So overall, our strategy in terms of underwriting has always been to try and become vertically integrated. We've had APIC in the United States for a number of years now.

Speaker Change: Mark maybe the first one.

Speaker Change: Maybe you could just talk about the move away from accelerating in terms of the underwriter that was in the filing.

Speaker Change: And maybe what that means for the company what it means for this one might be for both of you guys. What it means from a capital perspective needed to underwrite these pads and just how we should think about that throughout 2025.

Speaker Change: Yeah, I can take that off John and hand over to the floor and so overall our strategy in terms of underwriting has always been to try and become vertically integrated we have has a pick in the United States for a number of years now and Canada was really a matter of time for us to build that muscle to be able to create G pick which is a Canadian underwriting entity.

Fawwad Qureshi: And Canada was really a matter of time for us to build that muscle to be able to create GPIC, which is our Canadian underwriting entity. Really pleased to have that milestone behind us and to have this entity there and start to transfer the Book of Business Overshoot to our own underwriting unit. It really creates a reduction in frictional costs. That's the sole purpose of doing it. And I'll let Fawwad speak to the details there. Yeah. Hi, John. We've been planning for this transition for a while. Margie mentioned her letter. It's been part of our strategy.

Speaker Change: I'm really pleased to have that milestone behind us and to have this entity there and start to transfer the book of business diversity to our own underwriting unit. It really creates a reduction in frictional costs as the sole purpose of doing it and all that for one state to the T cell phone.

Yes, Hi, John.

Speaker Change: We've been planning for this transition for awhile.

Speaker Change: Martin you mentioned or letters have been part of our strategy.

Fawwad Qureshi: And from a capital perspective, there's kind of two components of it. The first is the existing reinsurance agreement that we have. So we have some capital there. And then within GPIC, we've already seeded that. So there's capital that sits in the entity. So at this point, just based on the profile of the business, we don't anticipate having to put additional capital in. You'll see, we talked about in the prepared remarks in Q1, you see that step up in the underwriting charge. That was planned. That was part of the negotiation. And it's obviously part of our guidance as well.

Speaker Change: And from a capital perspective, there's kind of two components of it. The first is the existing reinsurance agreement that we have so we have some capital there and then with <unk>, we've already seen it that so theres the existing capital that sits in the entity. So at this point just based on the kind of profile of the business, we don't anticipate having to put additional capital in.

Speaker Change: You'll see when we talked about in the prepared remarks in Q1, you'll see that step up in the underwriting.

Speaker Change: Charge that was planned and that was part of the negotiation.

Speaker Change: It's obviously part of our guidance as well so from a capital perspective, we're not anticipating anything different.

Unknown Executive: So from a capital perspective, we're not anticipating anything. Got it. Very helpful.

Speaker Change: Got it very helpful and maybe just to shift gears.

John Block: Maybe just to shift gears, you know, the NAFIA data that came out not too long ago, seemingly shows another year of share losses for Trupanion. You know, the rate of share loss in 24 actually accelerated versus 23. And I think I get some of that, Margie, maybe you sort of argue, look, we pulled back on the PAC spend until we right size the MLR. And now we're sort of going down that road. So maybe talk to the share losses. Is that sort of what you would lean on? Do you expect to, you know, have flat a share in 25, gain some back?

Speaker Change: The nephew data that came out not too long ago seemingly shows another here.

Speaker Change: Share of losses for Japan in the rate of share loss in 'twenty, four we're actually accelerated versus 'twenty three.

Speaker Change: I think I get some of that market. Maybe you can sort of argue look we pulled back from a pac spending until we rightsize, yeah more and now we're sort of going down that road. So maybe talk to the share losses is that sort of what you would lean on do you expect to.

Speaker Change: You know have flattish share in 25 gain some back and then sorry, just a quick tack on I don't see the slides up yeah, I don't know youre still going to be providing that information or youre pulling back on that but any comments too around some of your European initiatives and if those are still moving forward you know as was the plan.

Unknown Executive: And then sorry, just a quick tack on, I don't see the slides up yet. I don't know if you're still going to be providing that information or you're pulling back on that.

Unknown Executive: But any comments to around some of your European initiatives, and if those are still moving forward, you know, as was the plan under the 60 month.

Margaret Tooth: Thanks, guys. Yeah, there's a lot in there. I mean, yeah, let me take the first one. So actually, I'll take the second point, I believe the slides are up. So they should hopefully be there for you to view. And we've got that that detail there. So we take a step back and think about our strategy, which has been very consistent. So as a business, we've always stressed that we're looking to grow our adjusted operating income in a highly underpenetrated market and invest that money to increase our pet We always look to deploy that in the highest lifetime value product.

Speaker Change: Of the 60 months thanks, guys.

Speaker Change: Yeah. It does.

Speaker Change: Now let me Yeah, let me take the first one to say I'm not sure I'll take the second point I believe the signs are up so they should hopefully be that for each of you and we've got that that sort of detail. There. So if you take a step back and think about our strategy, which has been very consistent so as a business. We've always stressed that we're looking to grow our adjusted operating income in a highly under penetrated.

Speaker Change: So you should market and invest that money to increase our pet counts are.

Speaker Change: We always look to deploy that in the highest lifetime value product and we've always done it with our in our internal rates of return and so between that 30% to 40% now to your point, we absolutely double down on margin expansion in 2023 and 24. So we've really one pushing hard on growth, while we try to get that.

Margaret Tooth: And we've always done it within our internal rates of return. So between that 30 to 40%. Now, to your point, we absolutely doubled down on margin expansion in 2023 and 2024. So we really weren't pushing hard on growth while we tried to get that margin expansion back. We have, I think, done a fantastic job of doing that. We've come into year in a really healthy position. And we're starting to back into the water of growth. It's not surprising to me to see the market share is different this year than it was last year. We haven't been trying to grow.

Speaker Change: Margin expansion pack, we have I think done a fantastic job of doing that we've come into the year in a really healthy position and were starting to die phosphate back into the water right. It's not surprising to me to see the market share is different this year than it was last year and we haven't been trying to grow and I would say the other thing Trust is what really is driving this business is where do we drive.

Margaret Tooth: And I would say the other thing for us is what really is driving this business is where do we drive intrinsic value over time and market share is not a driver of our intrinsic value. It's why we don't chase it. Instead, we're committed to maintaining a discipline in our pricing and discipline in our growth strategy. And we as well as the industry pull back in general with you store significantly less money being pushed into pet insurance overall, which naturally, it doesn't satisfy the appetite of the pet parent. You're not seeing as many people coming through.

Speaker Change: Intrinsic value at the time and market share is not a driver of our intrinsic value. It's why we don't chase that and said we're committed to maintaining a discipline in our pricing and disciplined in our growth strategy and and you know, we as well as the industry pull back in general with Grace do you store significantly less money being pushed into into pet insurance overall.

Speaker Change: Naturally it's not it doesn't satisfy the appetite with the pet parent you're not seeing as many people come to three mm.

Margaret Tooth: I think for us, it's something we're going to continue to focus on the highest value products. And as I mentioned before, with Brandon, we've seen a good step up in leads, a good step up in retention and conversion has made some solid improvements. So overall, we will continue to do what we've always done. We've seen people come in and grow faster than us time and time again, and they're not there now. So, that doesn't concern us. In terms of the other products from the 60-month plan, we're really doubling down our focus on the highest lifetime value products we have.

Speaker Change: I think for US it is something we're going to continue to focus on the highest value products in them.

Speaker Change: As I mentioned before with Brian and then we've seen a good step up and needs to go step up and in retention and conversion has made some solid improvements. So overall, we will continue to do what we've always done them, we've seen people come in and grow faster than us time, and time again and they they're not there now so you know that that doesn't concern us in terms of the other products from the 16 months plan we've re.

Speaker Change: Any doubling down I'll focus on the highest lifetime value products, we have and that of course is the coach Japan and product doesn't.

Margaret Tooth: And that, of course, is the core to planning product. Doesn't mean that we are not happy with the progress. It really just means we've been prioritizing where we're going to get the best return over the course of the year. I'll expect to see that slightly shift back to have focus on other areas as well.

Speaker Change: It doesn't mean that we are not happy with the progress. It really just means we've been prioritizing where we're going to get the best return them over the course of the year I'll expect to see that slightly shift back to to have focus on other areas as well, but for now we're looking at the coach Japan in business and we will give you more details as and when that changes.

Unknown Executive: But for now, we're looking at the core to planning business and we'll give you more details as and when that changes.

Speaker Change: Thanks.

John Barnidge: Next question, please. Yes, the next question comes from John Barnidge from Piper's Handler. Please go ahead. Thank you for the opportunity.

Speaker Change: Next question. Please yes. The next question comes from John Barnidge from Piper Sandler. Please go ahead.

John Barnidge: Thank you for the opportunity question on the subscription loss ratio in the quarter seasonally more active quarter in the first half of the year I believe.

Unknown Executive: Um, question on the subscription loss ratio in the quarter, seasonally, a more active quarter in the first half of the year, I believe, um, was there any favorable reserve development in the quarter at all? And How much was it seasonally elevated, would you say, from where it ordinarily would be without that seasonality? Do you think that's reflecting maybe a bit more dynamic pricing that can anticipate more vets with like that annual calendar year change pricing? Yeah, I think maybe it's a two part question. I think from our POO standpoint, we had talked about pricing peaking from a year over year standpoint in Q4.

John Barnidge: Was there any favorable reserve development in the quarter at all and.

John Barnidge: How much was it seasonally elevated would you say from where ordinarily would be without that seasonality.

Yeah. So from a reserve perspective, the impact was about $1.7 million in Q1, So that's about 70 basis points.

John Barnidge: Impact in terms of.

John Barnidge: Q4 to Q1 linearity.

John Barnidge: It's actually down a little bit of versus historical so.

John Barnidge: Pretty much in line with what we expect that's put their rates and in Q1. So we're always going to see that increase I would say it was slightly lower than what we've seen kind of historically once you take into account the reserve impact.

Speaker Change: Do you think that's reflecting maybe a bit more time.

Speaker Change: Dynamic pricing back and anticipate more of that smoke likes that annual calendar year change pricing.

Speaker Change: Yeah I think.

Speaker Change: It's a two part question I think from our standpoint, we had talked about pricing, peaking from a year over year standpoint in Q4 and it largely played out so our expectation is entering this year that the rate of increase would start to diminish.

Fawwad Qureshi: And it largely played out. So our expectation is, you know, entering this year that the rate of increase would start to diminish.

Fawwad Qureshi: But I can talk, I can turn to Margie in terms of anything that we've seen unique this quarter from a pricing perspective for vets. invoice levels. And I mean, for us, it's really just a case of making sure we can monitor and stay in line with it. But I mean, seasonality is there. But you know, we're just continuing to execute in our plan, get the pricing, it's a cost of goods model, it's in line with our, well, it's slightly ahead of our expectations, which is good news.

Marty: I think I can talk I can turn to Marty in terms of anything that we've seen.

Marty: Unique in this quarter from a pricing perspective.

Marty: <unk>.

Marty: Yeah, I would say overall, it's pretty consistent with our expectations.

Marty: We had a big catch up in 2024 as you know from a rate perspective said that some of that shortfall that we had in prior periods. It wasn't that from Q4 to Q1. So I think kind of in terms of the dynamic pricing. That's have been there's been barrier rushing because they visit patterns. We're seeing wellness visits are down in general for them, but for us it hasn't impacted it we haven't seen any change.

Marty: In pricing, we're constantly looking at that cost of care and moderating it over the various invoice levels and I mean for US. It's really just a case of making sure. We can monitor and stay in line with that but I mean seasonality is bad but you know where we are just continuing to execute on our plan and get the pricing. It's a cost of goods model as it is in line with our wallets slightly ahead of our expectations.

Fawwad Qureshi: But we'll keep monitoring for Q2, because there's a lot of noise out there in the industry and making sure that we are in a good position to support the veterinary industry and the members of CHOOS at Thank you for that.

Marty: Kidney, but we'll keep monitoring for Q T. Because there's a lot of noise out there in the industry and in making sure that we are in a good position to support the veterinary industry and the members of cheeses.

Thank you for that and one last one I may have missed it but the amount of capital in excess of the minimums what was that this quarter I wasn't able to pick that up thanks.

Fawwad Qureshi: One last one. I may have missed it, but the amount of capital in excess of the minimums, what was that this quarter? I wasn't able to pick that up. Thanks.

Fawwad Qureshi: Yeah, so Margie talked about it in the shareholder letter that we ended last year from an APIC standpoint at about $140 million of overcapitalization. That's continued to grow. One of the biggest factors that we talked about last year is the new NAIC risk factors are now in place, so that's expanded even more. So we were more than 2x overcapitalized versus the required amounts. If you look at Q1, that continued to increase. We're now closer to 3x, a little bit over 3x overcapitalized.

Marty: Yeah, So Archie talked about it in the shareholder letter that we ended last year from an EPS standpoint at about $140 million of over capitalization. That's continued to grow one of the biggest factors when we talked about last year as the new SAIC risk factors are now in place. So that's expanded even more so we were more than two X over.

Marty: Capitalized versus the.

Marty: And the required amount if you look at Q1 that continued to increase for and I'll close with three acts a little bit over tracks over capitalized.

Fawwad Qureshi: I think we're pivoting the conversation to focus more on how do we monetize that surplus. So one of those avenues we talked about last year is the ordinary dividends that we've taken. So we've taken two of those. One was in the latter part, Q4 of 23, and then another one in the middle of last year. As those conversations progress, of course, once we have something to announce, we will be happy to do so. But we feel like we're in a good position. At the end, we want to be responsible and being over capitalized to the level we are, we view as a positive.

Marty: Pivoting the conversation to focus more on how do we monetize that surplus.

Marty: So one of those avenues, we talked about last year as the ordinary dividends that we've taken we've taken twice how two of those one was in.

Marty: The latter part of Q4 of 'twenty three and then another one in the middle of last year and so as those conversations progress of course once we have something to announce we will be happy to do so.

Marty: We feel like we're in a good position.

Marty: At the end, we want to be responsible.

Marty: And being Overcapitalized at the level, we are we view as a positive.

Unknown Executive: Thank you.

Marty: Thank you.

Marty: Thank you.

Katie Sakys: Our next question comes from Katie Sakys from Autonomous Research. Please go ahead. Thank you.

Moderator: Our next question comes from Judy Seki from Autonomous Research. Please go ahead.

Speaker Change: Yeah, one quick clarification to start off the 70 bips of.

Katie Sakys: One quick clarification to start off. The 70 BIPs of... year over year reserve development. That was an adverse impact, correct? Yeah, that's right. It was an adverse impact.

Speaker Change: Year over year Reserve development that was an adverse impact correct.

Speaker Change: Yeah, that's right it was an adverse impact.

Fawwad Qureshi: Okay, maybe if you can just kind of circle back to that line of questioning and delve a little bit deeper. I mean, it would be helpful to understand, you know, what, what drove that adverse development. And I mean, in commentary earlier in the call, it kind of seems like, you know, Trupanion is assuming Lost Trend in the VUT Channel Quite similar to what we saw last year, so I'm just kind of curious, you know, how confident are you that this quarter's, you know, significant improvement to the subscription loss ratio, you know, is being picked at the right point and will ultimately result in, you know, adverse development in a year's time?

Speaker Change: Okay, and maybe if you can just kind of circle back to that line of questioning and delve a little bit deeper I mean, it would be helpful to understand you know what what drove that adverse development and.

Speaker Change: And in commentary earlier in the call. It kind of seems like you know what your opinion is assuming.

Speaker Change: Loss trend in the vet channel.

Speaker Change: Quite similar to what we saw last year. So I'm just kind of curious to know how.

Speaker Change: Confident are you that this quarters, you know significant improvement to the subscription.

Speaker Change: Loss ratio.

Speaker Change: Is is being taped at the right point and will ultimately result in adverse development in a year's time.

Margaret Tooth: Yeah, I think it's a two-part question. Just in terms of the reserve, I mean, there was no change to our process. And so there was nothing different in terms of the approach or methodology that led to that. You know, we've seen positive development, adverse development over the course of the last few quarters. That was well within what we would expect in terms of normal Yeah, I mean, I think in terms of, to Fawad's point, the ebb and flow, you're going to see some puts and takes through the year in terms of, you know, do we get that spot on?

Speaker Change: Yes.

Speaker Change: A two part question just in terms of the the reserve I mean, there was no change to our process.

Speaker Change: And so there was nothing different in terms of the approach or methodology.

That led to that.

Speaker Change: Yes, we've seen.

Speaker Change: Positive development adverse development over the course of the last few quarters.

Speaker Change: That was well within what we would expect in terms of normal range.

Speaker Change: Yeah, I mean, I'm trying to answer that.

Casey: Casey I think I think in terms of until.

Casey: So far it's going to ebb and flow youre going to see some puts and takes through the year in terms of eventually get US also on the thing the actuarial reserving price test is as such that when you have the software you have different imago patents of invoices.

Margaret Tooth: I think the actual reserving process is such that when you have the software, you have different arrival patterns of invoices. And also what you see is as people start to focus on their dollars, they're going to send in, those that are being reimbursed, they're going to send in invoices after the fact. It's a normal course of business for us. It's something that we're constantly managing to try and get closer and closer to the number. But the reality is, in insurance, you're always going to have a little bit of wiggle room there. And, you know, obviously, we will continue to improve on that.

Casey: And <unk> side, what you see is as people start to focus on the dollars. They can ascend and those that are being reimbursed to going to send an invoice is after the fact, it's a normal course of business for us, it's something that we're constantly managing to try and get closer and closer to that number but the reality is in insurance, you're always going to have a little bit of wiggle room there.

Casey: And obviously, we will continue to improve on that but pleased overall with our loss ratio ended up. It was it was definitely ahead of the Cubs they.

Margaret Tooth: But pleased overall with where our loss ratio ended up. It was definitely ahead of the curve. So all in all, the quarter ended well.

Casey: All in all the quarter ended well.

Unknown Executive: Thank you for that.

Casey: Thank you for that I mean, maybe maybe shifting to the retention figure I mean, you know great to see that that's sort of trending in the other direction. This quarter, but obviously you know it's a it's a singular data point Hmm any reason to assume that this isn't a true inflection.

Katie Sakys: Maybe shifting to the retention figure, I mean, you know, great to see that that's sort of trending in the other direction this quarter, but obviously, you know, it's a singular data point.

Margaret Tooth: Any reason to assume that this isn't a true inflection? You guys have spoken about seasonality on the subscription pat invoice ratio. Can we extrapolate any of that seasonality to expectations for retention?

Casey: I have spoken about seasonality on the subscription part invoice ratio can we extrapolate any of that seasonality to your expectations for retention and are there any tailwind that you know when you guys might be expecting to see as the year progresses that could really help support continued retention improvements.

Margaret Tooth: Are there any tailwinds that, you know, you guys might be expecting to see as the year progresses that could really help support continued retention improvements? Yeah, it's a great question. It's a big, big focus for us retention and acquisition this year, we came into the year knowing that having just had such incredibly high increases for our members, that retention was where we'd need to focus. And we were doing so the back end of this year. And I think what you see is an inflection point. I think it's absolutely the result of the efforts of the team over the last few quarters to make sure that not only are explaining why costs are going up, but helping to reinforce the value of Trupanion and making sure that our software is available, that people are using direct pay, and all the things that basically go into being a Trupanion member.

Casey: Yeah. It's a great question, it's a big big focus for us retention and acquisition. This year when it came into the year knowing that having just has such incredibly high increases for our members and retention was why we'd need to focus and we were doing so the back end of this year and I think what you see as an inflection point I think it's obsity. The result of the efforts that the team over the last few quarters to make sure.

Casey: Sure there are not any or explaining why costs are going up.

Casey: But helping to reinforce the value of couponing and making sure that our so far is about the available that people are using direct pay and all the things that basically go into being a Japan members. So we're definitely seeing a focus on results related to that there is absolutely a tailwind I'm, having had 20% plus for several years now our members are now normalized.

Margaret Tooth: So we're definitely seeing a focus and results related to that. There is absolutely a tailwind. Having had 20% plus for several years now, our members are now normalizing their rate adjustments, and many of them will be below 20%. In the shareholder letter, I refer to the table where you see that cohort massively jumped to over 20. And that is naturally a pain for us as a business, and it's one that we're pleased to see some recovery from this year. So as we go through the year, we'll continue to really focus on this area, as well as first-year retention, because we expect that cohort to pick up as we add new vets, and anticipate we'll start making progress.

Casey: Their rate adjustments and many of them will be below 20% and a shareholder lesser I are faster the tape away you see that cable massively jumps to over 'twenty and that isn't actually a pain point for us as a business and it's one that we're pleased to see some recovery from the C. A S. A as we go through the year. We'll continue she really focused on this area as well as first year retention because we expect.

Casey: You want to pick up as we add new pet and anticipate will start making progress it will be slow and steady, but we will make progress towards what is how historical retention rate, which is higher than the 90 828, and we have at the moment.

Margaret Tooth: It will be slow and steady, but we'll make progress toward what is our historical retention rate, which is higher than the 98.28 that we have at the moment.

Unknown Executive: All things being considered, though, I think it's a very good result, and I'm pleased to see those early green Thank you for your answers.

Casey: All things being considered though I think it's a it's a very good results and I'm pleased to tell this early green shoots of recovery.

Casey: Yeah.

Casey: Thank you for your answers.

Okay.

Wilma Burdis: Thank you. Your next question comes from Wilma Burdis from Raymond James. Please go ahead. Hey, good afternoon.

Casey: Thank you your.

Speaker Change: Your next question comes from Wilma bodies from Raymond James. Please go ahead.

Wilma bodies: Hey, good afternoon.

Margaret Tooth: Could you talk a little bit about how you're thinking about getting additional rate throughout 2025? The loss ratio appears better than we would have expected for a 1Q. So do you need a lot more rate this year or how are you thinking about it? Thanks. Yeah, we are continuing to work with regulators to get rates. We have around 40% of our book, if not a little bit more, are priced ahead of the curve. So what I mean by that is pet parents have got pricing in place that won't need to be massively adjusted over the next 12 to 18 months.

Speaker Change: Can you talk a little bit about how you're thinking about getting additional rate throughout 2020 fives. The loss ratio appears better than we would've expected for a <unk>.

Speaker Change: So do you do you need a lot more rate this year or how are you thinking about it. Thanks.

Speaker Change: Yeah, we are continuing to work with regulators to get right. We have of around 40% of our book if not a little bit more price ahead of the curve. So what I mean by that.

Speaker Change: Is pet parents have got pricing in place what does it mean to be massively adjusted over the next 12 to 18 months.

Margaret Tooth: There are areas, as usual for us, where we're now starting to refine that rate to continue to build on what's needed as the cost of goods model. We've had good conversations with regulators. We're working with them, as we always do, on a very regular basis to ensure we can get the rate we need. As such, we haven't had anyone saying we can't. We're still working with them to get rate, and that's really part of the course of insurance, making sure that we're constantly adjusting and refining it, as you know, and we'll keep doing that. But our rate flow will come down.

Speaker Change: There are areas as usual for us where we were now starting to refine that rate to continue to build on what's needed as the cost of goods model.

We've had good conversations with regulators, we're working with them as we always do on a very regular basis to ensure we can get it right. We need as such we haven't had anyone saying, we can't wait to work with them to get right and that's really part of the course of insurance, making sure that we're constantly adjusting refining it as you know and and we'll keep doing that but a rate play will come down it.

Fawwad Qureshi: It won't be at the mid-20s as it has been for the last couple of years.

Speaker Change: Wouldn't be at the high the mid Twenty's as it has been for the last couple of years. So pleased to be returning to a more normal cadence and ER and that will show up in our loss ratio through the year as we see continued expansion in that over the course of the next couple of quarters.

Fawwad Qureshi: So pleased to be returning to a more normal cadence, and that will show up in our loss ratio through the year as we see expansion in that over the course of the next couple of quarters.

Fawwad Qureshi: Operating cash flow is pretty strong. Just curious if that's a run rate. Is there something unusual or how it should trend throughout the year? Thank you. Yeah, we've been really happy with the progress on both operating cash flow and free cash flow. When you break it down, the majority of that progress is driven by AOI. So we've talked in the past about a lot of companies will try and reduce spending as a way to maximize cash flow. We have not taken that approach. So more than two thirds of that is coming directly from increased AOI.

Speaker Change: On the operating cash flow was pretty strong.

Speaker Change: Just curious if that's a run rate or is there something unusual or how it should trend throughout the year. Thanks.

Speaker Change: Yeah, we've been really happy with the progress on both operating cash flow and free cash flow.

Speaker Change: And when you break it down the majority of that progress is driven by OE. So I've talked in the past about a lot of companies will try and reduce spending as a way to maximize cash flow. We have not taken that approach. So more than two thirds of that is coming directly from increased NOI.

Fawwad Qureshi: Yeah, and over the last, I think, four quarters, our We've delivered more than $50 million of free cash flow. I think it's $53 million. If you compare that to the previous four quarters, it was about $12 million. Of course, this quarter going from what was effectively break-even to $14 million positive. We talk about it all the time that this gives us capacity to be able to make investments, and that's a good position for us to be in. We still have our guardrail and our focus on free cash flow as a percent of revenue for the full year being at 2.5%, and we feel good about that start to the year.

Speaker Change: And over the last four quarters.

Speaker Change: Team has done a great job, we've delivered more than 50 million of free cash flow I think it's $53 million. If you compare that to the previous four quarters. It was about $12 million.

Speaker Change: Of course, this quarter going from what was effectively breakeven to 14 million positive.

Speaker Change: We talk about it all the time that this gives us capacity to be able to make investments in.

Speaker Change: That's a good position for us to be in we still have our guard ROA and our focus on free cash flow as a percent of revenue for the full year being at two 5%.

Speaker Change: And we're we feel good about it.

Speaker Change: To the year.

Unknown Executive: Okay, thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Yeah.

Josh Shanker: Thank you. Your next question comes from Josh Shanker from Bank of America. Please go ahead. Yeah, thank you. A few questions. So looking at the shareholder letter, I noticed that the cohort of of customers who received a 20% or greater increase went from 33 in 2023 to 46% of the portfolio in 2024. Is there any timing on that when that happened? Or is that number coming down now? I was actually surprised to see it up so significantly year over year. I know and it's testament to the team to have been able to retain those members at that level.

Speaker Change: Thank you.

Josh Shanker: Your next question comes from Josh Shanker from Bank of America. Please go ahead.

Speaker Change: Yeah.

Josh Shanker: Yeah. Thank you.

Josh Shanker: So I'm looking at the shareholder letter I noticed that the cohort of.

Josh Shanker: Of customers, who received a 20% or greater increase went from 33 in 2023% to 46% of the portfolio in 2024.

Josh Shanker: Is there any timing on that when that happened or is that number coming down my where I was I was actually surprised to see it up so significantly year over year.

Josh Shanker: I know and I, It's testament to the teams have been able to say it retain these members at that level is coming down it's coming down now it comes down every every week every month as we start so for new rates through and normalize that for the consistent rate adjustments. We've seen so as pricing has been at a level of 15% and we fully expect that now to be a somewhat.

Margaret Tooth: It's coming down. It's coming down now. It comes down every week, every month as we start to put new rates through and normalize that for the consistent rate adjustments we've seen. So as pricing has been at our level of 15%, we fully expect that now to be a somewhat average increase for our members because that's now sort of a normalized rate for us. It built over the course of 24 where we started to see an incredible number of people move into that book as more of that rate flowed through and we had the approvals. So now it's really a case of returning to what is normal for our members and for us.

Josh Shanker: <unk> increased for our members because that's now sort of a normalized rate for us it builds over the course of 24, while we started to see an incredible number of people move into that that book is more of that rate play through and we have the approvals. So now it's really a case of returning to what is normal for our members and for us and I fully expect by the end of this year you're going to see.

Margaret Tooth: And I fully expect by the end of this year, you're going to see a big shift back towards that under 20%. It doesn't mean people won't be getting rate increases in the high teams. They absolutely will, but we'll be normalizing that. And we know that that's a far more effective retention cohort for us. So pleased to be getting that tailwind and that benefit through the rest of the year.

Josh Shanker: A big shift back towards that under 20%. It doesn't mean people wouldn't be getting rate increases in the high teens AMC well.

Josh Shanker: That will be normalizing that and we know that that's a far more effective retention tool for us I am pleased to be getting that tailwind and that benefit through the rest of the year.

Margaret Tooth: And then on the first-year customers, retention went down dramatically for first-year customers who didn't see any rate change at all. I know for many reasons, they're historically the hardest customers to retain, and maybe you don't even want them, they're leaving for a reason. But the retention dropped fairly sizably in that cohort. What's going on there? Yeah, it's purely a matter of execution. When we think about attention, there are only so many things that the teams can focus on at any given point in time. And as you can see, there was such a shift into the over 20% group, that cohort, we were incredibly focused on making sure that we were paying attention to people who were getting those increases, helping them realize the value, understand the value proposition, understand what's happening in the industry, that we really took our eye off the first year.

Speaker Change: And then on the first your customers our retention went down dramatically for first year customers, who didn't see any rate change at all I know for many reasons, but historically the hardest customers routine that maybe you don't even want them. Those that are leaving there would be room for a reason, but the retention drop fairly sizeable in that cohort what's going on there.

Speaker Change: Yeah, it's purely a matter of execution, when we think about attention there or any say many things that the teams can focus on at any given point in time and as you can see there was such a shift into the over 20% great that cohort we were incredibly.

Speaker Change: The focus on making sure that we were paying attention to people who were getting nice increase that's helping them realize the value understand the value proposition understand what's happening in the industry that we really took our eye off the first year, a because you weren't growing but it can be quickly and we didn't have such a great a such a large number but also for us a greater good was looking at the majority of pet parents, who were already what's your opinion.

Margaret Tooth: A, because we weren't growing particularly quickly, and we didn't have such a great, such a large number. But also, for us, our greater good was looking at the majority of pet parents who were already with Trupanion. So, there's been a shift since the beginning of Q4 last year, where we realigned some of our marketing structure to make sure the conversion and retention teams work hand-in-hand. So, the messaging that someone hears when they sign up is aligned to what they hear as a member. And also, just really making sure we have resources to better educate the new pet parent, help getting them at times where there's typically buyers remorse, and putting in tactics that will help to improve that.

Speaker Change: So there's been a shift and since the last the beginning beginning of Q4 last year, where we realigned some of our marketing structure to make sure the conversion and retention teams work hand in hand, so the messaging that someone has when they sign up is aligned to what they have as a member.

Speaker Change: And also I was just really making sure we have resources to.

Speaker Change: Bachelor educate the new pet parent help getting them at times, where there's typically buyers remorse and putting and tactics that will help to improve that we're already seeing improvement in that space. So I feel very good about the tactics with starts to deploy and expect that to improve as we continue to use more of our partners in that first year buckets, just see that move back into to levels. It was at historically.

Margaret Tooth: We're already seeing improvement in that space. So, I feel very good about the tactics we've started to deploy and expect that to improve as we continue to use more of our pet dollars in that first year bucket to see that move back into levels it was at historically.

Margaret Tooth: And Mar, you included a graph in your letter about trying to show the relationship between PAC spend and increasing conversion for web versus phone based customers. And I looked at that chart, and I wasn't sure that I could see the correlation. I mean, obviously, the PACs wasn't on that chart, but it was spoken about, like, rhetorically. I noticed two things. One is that even if there is a boost, it's hard to boost it for more than a month, it seems to pop and then fall. Can you go into a little bit about how that PAC spending works to increase the conversion and what that chart should be telling us?

Speaker Change: And Marc you included a high.

Speaker Change: RAF in your letter about trying to show the relationship between Pac spending increasing our conversion for web versus a phone based customers.

Speaker Change: And I looked at that chart and I wasn't sure that I could see.

Speaker Change: The correlation and obviously the pacman was on that chart.

Speaker Change: It was spoken about.

Speaker Change: Shortly I noticed two things one is that even if there is a boost its hard to boost it for more than a month that seems to pop and then fall can you go into a little bit about how that.

Speaker Change: Pac spending works to increase the conversion and what that chart should be telling us.

Margaret Tooth: Yeah, well, you hit the nail on the head. I mean, the main thing is really the consistency of spend. And when you have reduced acquisition dollars, and we really weren't spending a lot in the conversion space, we were turning it on and off. And there's a couple of things at play here. One is when you deploy it, it's easier. Or I would say, easier is probably the wrong word. It's more natural for phones or people on the phone to be able to listen to the response of a pet parent and help to learn and lean into how do you convert that member.

Speaker Change: Yeah, well you you you hit the nail on the head I mean, the main thing is really the consistency of the spend and when you have Regis acquisition dollars and we really want spending at all in the conversion space, we were turning it on and off and there's a couple of things that play here. One is when you deploy it is easier.

Speaker Change: Well I would say, it's probably in the wrong way if it's more natural for things other people on the phone to be I wish you listen to the response of a pet parent and helped to learn and lean into how do you combat that members say they tend to get that retention rate the conversion rate up higher click up.

Margaret Tooth: So they tend to get their conversion rate up higher quicker. But from a web-based perspective, while you have a volume there, there's a lot of trial and error. There's a lot of testing. And if we don't keep consistency of our investment, you don't get to build on the things that you're learning. And so really, the key for that chart is helping people understand that if we turn on spend and turn it off the next month or turn it on and turn it off the next quarter, it has a small blip in terms of an improvement, but it doesn't stay there.

Speaker Change: But from a web based dispatch if all you have a volume that there's a lot of trial and error. There's a lot of testing and if we don't keep consistency of our investment you don't get to build on the things that you're learning and so really the key for that chart is helping people understand that if we turn on spend and tight after next month, we'll turn it on turn it off next quarter. It has a.

Speaker Change: Small blip in terms of an improvement, but it doesn't say that we have to maintain the level of investment which is what we were doing for 10 years price it to reducing our pet acquisition spend and we kept learning and kept building and kept increasing our conversion. So it's really a lesson of let's make sure we're being consistent let's make sure that all compounding NOI dollars being deployed.

Margaret Tooth: We have to maintain the level of investment, which is what we were doing for 10 years prior to reducing our pet acquisition spend. And we kept learning and kept building and kept increasing our conversion. So it's really a lesson of let's make sure we're being consistent. Let's make sure that our compounding AOI dollars are being deployed in the right ways, in the right format, and doing it in a manner that allows us to learn. If we keep being erratic with it, we're not going to get that learning. So that's essentially what that chart is trying to demonstrate.

Speaker Change: The right ways and the right format and doing it in the amount of that allows us to learn if we keep being erotic with it we're not going to get that lending side, that's essentially what that child exercise trying to demonstrate.

Unknown Executive: Okay, well thank you very much for the answers. Yeah, thank you. Thank you.

Speaker Change: Okay, well, thank you very much for the answers.

Speaker Change: Thank you.

Speaker Change: Thank you.

Katie Sakys: The next follow-up question comes from Katie Sakys from Autonomous Research. Please go ahead. Yeah, thank you for the follow-up. Just a quick one from me. You know, reading through this year's shareholder letter, you guys circle back on the subject of digital advertising and, you know, really make the point that a lot of online customer acquisition is frequently, you know, structured in a pay-to-play manner for the current pet insurance industry. In years past, that's been something that you've, you know, specifically issued and said that you would not be participating in.

Speaker Change: The next follow up question comes from J D C. He's from Autonomous research. Please go ahead.

Speaker Change: Yeah. Thank you for the follow up just a quick one for me and you're reading through the series shareholder letter.

Speaker Change: Circle back on the subject of digital advertising and really make the point that a lot of online customer acquisition is frequently yeah restructured in a pay to play manner for the current pet insurance industry.

Speaker Change: In years past, that's been something that you've you know specifically issued inside that you would not be participating in it is there any reason to think you know as you realign your marketing.

Margaret Tooth: Is there any reason to think, you know, as you realign your marketing strategy going forward that, you know, Online acquisition will continue to be something that you avoid, or would there be a point at which Trupanion starts to invest more into DTC marketing and really competing for, you know, space in online search results? Yeah, we do. There's a lot to unpack here, actually. I think one thing that we are on, we do advertise online, we do have direct-to-consumer marketing, but it really, as I mentioned, the shareholder letter is very much more a conversion tool. So it helps to sort of find people where they are, helps to educate them, pull them through the funnel.

Speaker Change: The strategy going forward, but.

Speaker Change: Yeah.

Speaker Change: Online acquisition will continue to be something that you avoid or would there be a point at which Japan Ian starts to invest more in deep entity, DTC marketing and really competing for.

Speaker Change: Space in an online search results.

Speaker Change: Yeah, we do there's a lot to unpack here actually I think one thing that we are on when do you advertise online we do have direct to consumer marketing, but it really as I mentioned the shareholder that story is very much more a conversion tools that helps us to find people, where they all helps to educate them pulling through the funnel I think in terms of the way the competitive spend my poor.

Margaret Tooth: I think in terms of the way that competitors spend, my point there was, we are adhering to internal rates of return, which means we have to be very disciplined with acquisition costs. And a lot of those sites or vehicles tend to be incredibly expensive on a CPC basis, or a cost per click basis, or cost per acquisition basis. So if we layer that on with our lead costs as well, it tends to fall outside of our guardrails. So we will do it. We'll test and refine it. As a brand, as a company, we've been quite deliberate in our choice of the platforms and the vehicles that we operate with.

Speaker Change: That was you know we are adhering to internal rates of return, which means we have to be very disciplined with acquisition costs and a lot of days.

Speaker Change: So vehicles tend to be incredibly expensive on a CPC basis or cost per click basis or cost per acquisition basis. So if we layer that on without leaves cost as well it tends to fall outside of our guardrail. So we will do it will test and refine it as a brand as a company we've been quite.

Speaker Change: Deliberate in our choice of the platforms and the vehicles that we operate with them in a fledgling market. It's incredibly important to make sure that we're being clear and transparent with how brands and products show up and personally I think sometimes that hasn't been clear and we choose to operate with with vehicles that actually are more clear in the way that that just playing results.

Margaret Tooth: In a fledgling market, it's incredibly important to make sure that we're being clear and transparent with how brands and products show up. And personally, I think sometimes that hasn't been clear. And we choose to operate with vehicles that actually are more clear in the way that they're displaying results. The last thing that we would want to happen in this industry is have it commoditized before it's a commodity. And I think sometimes people see things and they believe them to be true. So if you see rankings, what they don't necessarily understand is that someone has paid a significant amount of money to be number one.

Speaker Change: The last thing that we would want to happen in this industry, it's highly commoditized before it's a commodity.

Speaker Change: And I think sometimes people say things then they believe them to be true. So if you see rankings well they don't necessarily understand is it someone who has paid a significant amount of money to be number one now that's fine, but for Japan, and we have to weigh that against the IRR. So that's why you don't see it across every vehicle everywhere as the market picks up I expect we'll start to test a little bit more on some.

Margaret Tooth: Now that's fine. But for Troupanion, we have to always adhere to the IRR. So that's why you don't see us across every vehicle everywhere.

Margaret Tooth: As the market picks up, I expect we'll start to test a little bit more in some of these spaces to make sure the brand can be relevant and present. But it always has to fit within the IRR. So that tends to be a factor for us as we think about our strategy.

Speaker Change: These spaces to make sure that Brian can be relevant and present, but it always has to fit within the IRR. So that that tends to be a factor for us as we think about our strategy there.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Unknown Executive: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session.

Margaret Tooth: I would now like to turn the conference back over to Margie Tooth for closing remarks. Thank you, Sagar. We don't usually have closing remarks, but I did want to just reiterate to everybody what a strong start we had to the year and just recognize our subscription margins expanded. We saw retention for the core Trupanion product improve, which demonstrates our pricing power. We've had inflection point, I think, in NetPack growth, which is incredibly positive for us. And it leads us to the rest of the year from a position of strength with compounding adjusted operating income that we will reinvest in growth.

Speaker Change: I would now like to turn the conference back over to Mark <unk> for closing remarks.

Speaker Change: Thank you stock Oh, we don't usually have closing remarks, but I did want to just reiterate to everybody what a strong start we had to the year.

Speaker Change: And just recognize all subscription margins expand as we saw retention for the coach Japan in products improve which demonstrates the pricing power. We've had an inflection point I think cannot put great which is incredibly positive for us and it needs as to the rest of the year from a position of strength with compounding adjusted operating income that we will reinvest in growth.

Margaret Tooth: We look forward very much to updating you on our progress in up and coming quarters. And as a reminder, Fawwad and I will be in Omaha, and we hope to see many of you there. Thank you.

Speaker Change: We look forward very much to updating you on our progress in an up and coming quarters and as a reminder, for and I'll be in Omaha, Orange that we hope to see many of you there.

Speaker Change: Yeah.

Speaker Change: Thank you. Thank you.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Unknown Executive: You may now disconnect.

Speaker Change: Yeah.

Speaker Change: [music].