Trupanion, Inc.

Greetings and welcome to the Trupanion, Inc. first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Laura Bainbridge of Investor Relations. Thank you. You may begin.

Good afternoon and welcome to True Panion's first quarter 2021 financial results conference call. Participating on today's call are Daryl Rawlings, Chief Executive Officer, and Tricia Pluss and Margie Tooth, co-presidents. Similar to prior earnings calls, Margie will be joining Daryl and Tricia for the Q&A portion of today's call. Before we begin, I would like to remind everyone that during today's conference call, we will make certain forward-looking statements regarding the future operations, opportunities, and financial performance of Trupanion within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed. A detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our investor relations website, as well as the company's most recent reports on Forms 10-K and 8-K filed with the Securities and Exchange Commission. Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation, fixed expenses, variable expenses, adjusted operating income, acquisition costs, Internal rate of return, adjusted EBITDA, and free cash flow. When we use the term adjusted operating income or margin, it is intended to refer to our non-GAAP operating income or margin before new pet acquisition. Unless otherwise noted, margins and expenses will be presented on a non-GAAP basis, which excludes stock-based compensation expense and depreciation expense. These non-GAAP measures are an addition to, and not a substitute for, measures of financial performance prepared in accordance with the U.S. GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on Trupanion's Investor Relations website under the quarterly earnings tab. Lastly, I would like to remind everyone that today's call is also available via webcast on Trupanion's Investor Relations website. A replay will also be available on the site. With that, I will hand the call over to Daryl.

Thanks, Laura, and good afternoon, everyone. 2021 is off to a flying start. This is apparent in our Q1 results, which I will share momentarily. But first, I want to point your attention to my annual shareholder letter, which was published earlier this week. As usual, it includes the key annual metrics that we believe drive Trupanion's intrinsic value. Some of the annual metrics shared in the letter include the number of territory partners, active hospitals, same-store sales, as well as financial highlights, including our year-over-year increases in revenue and adjusted operating income. They show strong internal rates of return and the strengthening of our balance sheet. What is different about this year's letter compared to most is that it also includes a copy of our five-year strategic growth plan, or as we at Trupanion call it, our 60-month plan. In the plan, we share the vision of where we are headed and lay out the roadmap for us to deliver meaningful growth in revenue and intrinsic value. I would encourage you all to read it. In doing so, I hope you'll share in our excitement for the future. Ultimately, our ability to deliver against our plan comes down to execution, and execution comes down to people. Tricia and Margie are co-presidents are leading the teams responsible for the execution of the plan. Our upcoming shareholder meeting on June 16th will be your opportunity to meet and have direct Q&A with the individuals and teams that are directly responsible for the initiatives outlined in the strategic plan. Our annual shareholder meetings are thoughtfully constructed to be the most valuable source of information for shareholders each year, and we hope you'll be able to attend in person or via Zoom. As I noted earlier, but it's worth repeating, the first three months of our 60 month plan are off to a very strong start. So let me jump into our first quarter results. Total revenue increased 39% in the quarter. This was driven by 121% increase in subscription net pet growth, which is exceptionally strong. Adjusted operating income increased 40% to 16.8 million. We were able to deploy 100% of these funds within our subscription business and an estimated internal rate of return of 35%. In total, we added approximately 56,000 new subscription pets in Q1, an increase of 54% year over year. Growth benefited from both increased leads and conversions across all channels. We also saw continued strong retention, which is impressive given our accelerated growth. One additional marker of our accelerated growth can be seen in our expanded brand presence. Over the last six months, the number of people searching for Trupanion has grown by 57% in the United States and 78% in Canada, while the search term pet insurance has been flat to slightly down. In 2020, we estimate that we increased intrinsic value by $1.4 billion, and we shared approximately $55 million of this increase in stock grants with the team, including a $4 million one-time bonus to all team members. Additional details can be found in our annual shareholder letter. Our financial position is strong with cash and assets of over $513 million, and we are well capitalized to afford these accelerated growth rates. With our strong cash position, we have been making longer-term investments in areas like our member experience with the goal of improving retention, as well as in technology that will help strengthen our position as the low-cost provider. While early on, we've already seen some intended benefits manifest in our key metrics. Trutopia, what we used to refer to as Nirvana, which, as a reminder, measures the difference between existing pet owners adding pets or referring friends and those that churn, reached a new record in the quarter at a gap of just 0.3%. Broadly, we're seeing more and more opportunities, opportunities that have come from over 20 years of industry experience, achieving operating scale, defensible moats, and a brand position in a large and underpenetrated market. With that, I'll hand the call over to Trish to talk about our Q1 results.