Good morning, or to those of you who are joining from around the world, good afternoon and good evening. Thank you for joining our annual founder-led Q&A. With me today are Darryl Rawlings, CEO and founder, Margi Tooth and Tricia Plouf, our co-presidents, and you may even see Tristan the Bulldog running around. As many of you know, this Q&A is an annual event for Trupanion, traditionally held immediately after the Berkshire Hathaway annual shareholder meeting in Omaha. COVID has required that we move this event virtually for the past two years, but the intent is the same, and that is to connect with long-term, like-minded shareholders. The format of the event also remains unchanged, entirely Q&A, which means that the success of the event depends on your participation, so bring your questions. To do so, please raise your hand and I will bring you over in our online webinar as a panelist, and this will allow you to unmute your line and also share your camera. Please note that there's sometimes a delay when we do so during that transition, so know that that's normal. Berkshire Hathaway meeting starts at about 10:00 A.M. Pacific Time. That leaves us with about two hours for questions. We'll go ahead and get started. First, we'll wait for you to gather your questions. Tristan might have some questions if nobody else does. Hi, everyone. Thanks for joining us. Oh, I'm glad he's moved his bottom. I was worried it was pointing in my direction. All right, somebody be brave and ask the first question. Great. It looks like we have a question from the line of Shweta. Shweta, I'm going to go ahead and bring you over as a panelist, and again, that will allow you to share your camera and unmute your line. Can you hear me? Hi, Shweta. Hi, Shweta. Hello. Good morning. I guess my question is, you laid out your five-year, 60-month plan. There were several catalysts that allow you to get to your goal of 25% CAGR over the next five years. Could you probably talk to how much conservatism is baked into that? Perhaps, with the rate you're going right now, just in your subscription business, with the Trupanion-branded product, I could see that growing about at 25% CAGR, not even including some of your growth catalysts. I would love to hear your thoughts on sort of the conservatism that's baked into your 60-month plan. The second is, what excites you the most about your next five years? You talk about a lot of things. What are some of the top two or three things that you're most bullish on? Thanks. Thanks, Shweta. I'll start off. The 60-month plan really talks about the building blocks or the growth levers that we will have for the coming decades. For a lot of those initiatives to get started, the first several years of them they'll have very little impact on the P&L. We know that when we enter a new region, it takes us up to five years to get to the point that about 50% of hospitals become active. It takes a long time to build relationships, it takes a lot of time. We have a number of initiatives in the plan, and I'm sure we'll cover many of them today. If you added the potential of each of those, we would far outstrip 25% year-over-year revenue growth or growth in intrinsic value. We are realistic in understanding that every initiative will not work out. We'll have different teams and different owners, taking on different areas like international expansion, product expansion, distribution expansion. Some will succeed, some will be slower than we expect, and some will not work. In aggregate, if we grow the company 25% a year for the next five years, we will have felt like we've created a lot of value for our shareholders, and feel good about it. The second part of your question, I'll talk about what I think I'm most excited about, and then ask Margi and Trish to kind of weigh in. We've used the term Nirvana for a long time. We've recently changed, coined the term TruTopia, and that's what I'm most excited about. If we can have a value proposition and a customer experience where veterinarians and pet owners really trust and recommend us. I think we can get to the point where the number of pets that are canceling or churning can be offset by existing pet owners telling their friends who are adding pets. We've made some really good strides. We've been more bullish on our investments in that area. Yeah, I'm super excited about it. Yeah. Hi, Shweta. Thank you for asking the first question. I think just to add to the building block question you had before, when we think about those building blocks, they are very visually-minded. I'm very visual. I'm thinking about them building on one another. They don't all start necessarily at the same time. We're going into the five-year plan obviously with the core subscription business being really strong, which is great. Lots of growth potential there, and then gradually layering on additional opportunities as we can, acknowledging to Darryl's point that not all of them will come up. There is some conservatism. I think it's also realistic to expect that. That's exciting. I think in terms of where I'm most excited, it's really as we look at the brand today, Trupanion, the opportunity to be able to have a conversation with every single new pet owner in North America, and educate them, help inform them, help give them details about how they can take care of their pet in the best possible way. I think that's pretty cool. I think that brand's starting to be recognized and actually really taking hold. Yeah, I think it's a great question. I would piggyback a little bit off of what Margi said. I think it's really exciting to see how far the company, and particularly the brand, has come. I've been with Trupanion over eight years now, and particularly in this past year, I feel like we've just built such a great brand that we're all proud of. I think the Aflac investment is an example of that, of them really wanting to partner with us specifically, because they felt that that was the best avenue to success. I think as we've thought about our 60-month plan, one of the things that you might have noticed is we're not necessarily going to pursue every single opportunity because there are many more opportunities than we necessarily want to do at this point with the brand and the company we've built. We're going to focus on the things that we feel have the best chance of consistently hitting those growth rates and setting us up, frankly, for well beyond the next five years. The only other thing I would say is we spent a lot of time, particularly Margi and I, building great teams, and I think we're really excited to execute with those people over the next five years and seeing the excitement on our teams' faces, to do this, and they were a part of building this plan, has been really motivating. Okay. Thank you, Darryl, Margi, and Tricia. Thanks, Rhonda. Thank you. Okay, next we're going to take a question from Peter Keith. Hi, Peter. Peter, you're on mute and your camera's off. Let's see here. There we go. By the way, here's your newest and most important insured. He looks great. Daryl, my question as I loaded it in was, does your personal investment philosophy differ from Trupanion's corporate capital allocation philosophy? If so, how? That's a great question. So 96% of my net worth is in Trupanion, so I'm not sure that it takes a wide differential. At Trupanion, we really think about building moats. We think about building something over decades. We have much higher hurdle rates than most of the companies that I look at for investment. We're targeting a 35% internal rate of return. I look for the same things. When I study other businesses out of curiosity, I look for those things. I'm a shareholder in only two other companies than Trupanion, and just very tiny amounts. One company is a company that you guys will all be watching later today, Berkshire. Another one is a company, Amazon. I'm a huge fan of Costco. Those are the types of business models that I believe are very long-term enduring and have big moats around them. Also, I think it's really important that a company protects everybody inside of their ecosystem, so it needs to be a win for all. Those are the things that I would look for as a personal investment. For the last 30 years of my life, I started this company with a $5,000 credit card. I have not been flush with cash making investments. The focus has been building on Trupanion. I study other businesses because I'm intellectually curious to learn. Great. That's an excellent response. Thanks very much, Darryl. Continued success to you and your entire team. Thanks for taking care of that new puppy. By the way, it came from. Okay. It looks like we have a question from the line of Namir. Namir, I'm going to go ahead and bring you over as a panelist. One minute. Hey, everyone. Thanks for organizing the Q&A. I had a question around your revenue per pet. It has grown at 5%-6% per year over the past couple of years. What has driven the above-inflation type of growth? How should we think about that figure over the next five years? Let me start it off. It is growing by inflation. It is just not the inflation of North America. It is the inflation of veterinary expenses, and in particular, the inflation rate of veterinary expenses for an insured client. Clients of Trupanion visit twice as frequently and spend twice as much money, a little bit more than that, when they get Trupanion. Imagine if Tristan down below started limping or vomiting, diarrhea, some early clinical symptoms. A client with Trupanion is more likely to bring him in on day 1 instead of waiting and saying, "Oh, I hope he feels better tomorrow." When he has to go in, instead of veterinarians often saying, "There is a couple of course of treatments. Do you want to do this one? It's the least expensive," or, "This is what I'd recommend if you can afford it," an insured client with Trupanion does the better level of care. Veterinary inflation includes, for us, greater use of diagnostics, greater use of emergency specialty hospitals. That is what we've been tracking. Now, that 5% to 6% rate has been consistent for 20 years. I would be thinking that you should only expect the same for the next 20 years. Although, if there are any veterinarians listening, we think there's a big challenge in the veterinary industry in being able to come up with enough compensation for veterinarians and their staff. The business model for veterinarians is extremely challenging. These are small businesses. It's a hospital that has its own HR, IT. Everything's built into it. I would encourage veterinarians and their staff to charge more for their services. They bring an incredible amount of value to pet owners and to pets. The share of wallet on how much is being spent on veterinary care or the health of a pet compared to Halloween costumes or chew toys or doggy daycare is a small percentage. Consumers, pet owners will happily pay more as long as they're getting good service. We make it easier for them to budget for the things that are unexpected. It's very difficult for a pet owner to come out of pocket for three or five or $20,000. For something that is in a monthly recurring revenue, consumers don't have any problem spending on the pet. I would like to see the inflation rate go up even higher to make sure that the veterinary industry is getting rewarded the way they should. The average veterinarian today is making about $75,000 a year, whereas the average dentist, I think, is making about four to five times that. It's more difficult to get into veterinary school than it is to become a dentist or a human doctor. Veterinarians have the highest suicide rate of any profession. It is a very difficult, demanding business. The fact that when a client's on Trupanion, they're willing to come in early, get the proper level of care, be referred out to a specialist if they need to, we think we're really not only helping solve the problem for the pet owner and for the pet, but also for the ecosystems of veterinarians. It's kind of a long answer, but did I miss anything? The only thing I would add is related to your question about long-term, and Darryl said it very well, but when we think about it overall in terms of our business model, we're really, at the end of the day, making sure that those increases in the monthly cost are in line with, like Darryl said, the increases in the vet invoice expense and really hitting that 71%, and in the 16-month plan, the 72% margin. That's ultimately the goal is to move in lockstep as opposed to driving it up or down, just having it be where it needs to be to hit that margin, which then allows us to ultimately hit that targeted 15% adjusted operating income. That's what we're really focused on is pricing to hit the ratio and allowing the vets to practice the care in accordance with that. How should we think about, I mean, it sounds like the increase in revenue per pet is tied to the increase in claims cost. How should we think about when the revenue per pet is increasing, how is the lifetime value of the pet being impacted, please? Well, if we maintain the same margin, the ARPU is going up, the margin percentage remains the same on the bottom, and you multiply that by the number of months. When you're making a 15%, right now we're above 13.5%, 14%, but our target's 15% margin on $50 a month, that gives you a different dollar amount than if it's $100 a month. As long as you're maintaining the same amount, you'll see the lifetime value increase. Yeah. Absent any future margin expansion, we have a little bit more to hit our target. We should expect our lifetime value to be growing consistent with the ARPU. Okay. Probably within the next two to three years, expect it to grow 5%, 6%, 7% a year. That's before potentially any changes with blend. We've got some pet food initiatives that might drive ARPU much higher. We have some other ones that might drive it slightly smaller, but the margin profile should remain the same. Margi Tooth, do you have anything to add? No. When we think about the lifetime value Sorry, yes, I do have something to add. Hello. When we think about the lifetime value, that obviously also comes back to when we think about our internal rates of return. As the lifetime value gets higher, that's more money that we can ultimately spend to acquire more pets. That's good for us in terms of growth. It's definitely fitting in with our growth catalyst mentality. Got it. Very helpful. Thank you. Thank you. Okay, looks like next we have a question from Elliot Wilbur. Elliot, I'm going to go ahead and bring you over. Hi, Elliot. Hello, Elliot. Thanks. Good morning. Can you hear me all right? Yeah, we can hear you great. Great. Thank you. Thanks for putting this together. Two questions, really. First one's just a follow-up to your prior commentary around the long-term inflation rate. How do you think about the improvement in technology, particularly on the therapeutic side, with respect to more and more new molecular entities entering the veterinary treatment paradigm, and we're looking at sort of the advent of monoclonal antibodies in certain therapeutic categories. They're drugs which historically, at least on the human health side, have significantly higher price points than traditional small molecules, and probably the same will hold true for the vet world. Just seems like with the evolution of technology, particularly on the therapeutic side, there would seem to be more sort of natural upward pressure on that longer-term 5%-6% rate that you spoke about. I wouldn't describe it as pressure. We embrace it. The higher the cost of veterinary care, the greater the demand or need for our product is. I don't know many business owners. If I had a restaurant and somebody came in and said, "I can spend $50 for dinner, or I can spend $100. Which would you rather do?" As long as we're providing the same underlying value proposition, and as veterinary care goes up, our need for our product becomes larger. I know a lot of people that were born and raised in insurance think that paying invoices is a cost, and they celebrate when they lower their cost of goods. We don't feel that way. We absolutely embrace and support cutting-edge new technologies. Some of those will make the cost of veterinary care rise faster. Other ones will detect issues sooner. There's a lot of diagnostic companies, like IDEXX and therapeutic companies and all the ones. We are arm in arm in them bringing products to the market, and we don't care. Our job is not to try to control the costs, but our job is to understand them. You may be right that the changes in therapeutics might drive it to 7% or 8%. I will tell you, I've been doing this for over 20 years, and I heard similar things. It's been pretty consistent, 5%-6% year-over-year for 20 years. I know I interrupted you. You can finish the conversation. I just want to make a really clear point to anybody who's listening. We are not trying to control costs. We don't think it is a negative. Okay, thanks. I want to ask you a question about the longer-term opportunity in international markets, just some of the key differences between markets that you've evaluated in the U.S. market. Is the Trupanion model completely transportable based on the current U.S. model into some of these markets? How different would it have to be? Just what the relative utilization of insurance is outside the U.S. versus the U.S., is this something you can approach on a larger regional perspective, or is it really more country by country? Well, I'm going to hand that over to Margi Tooth to start. Go from there. Happy to. I think, when we think about anywhere we're going, the purpose of us going to new market is not just to collect the passport stamp, it's to make sure that we have access to more hospitals with the brand. Thinking about that as our initial kind of, okay, where do we have good penetration potentially, and we've got the ability with software practice management systems, and we have some potential adoption of insurance already. Yes, there are different scales. There's different penetration rates when we think about Australia versus the U.K. versus Germany versus Sweden. Across the globe, there is a very different story to be told. Japan is interesting when we look at that model. To answer your question specifically about the Petplan brand and the Trupanion brand. If you think about Petplan in the U.K., they've got a stronghold in that market. I think about any brand and any product, we can take our product as it is today, and I feel very confident that, yes, there'll be some tiny tweaks. The guardrails that hold us true to who we are as a company, being able to provide the broadest, most comprehensive coverage for people for the life of their pet will absolutely remain true to Trupanion wherever we are. We want to be able to have that, just like people are flying from different Well, eventually, they'll be flying from different countries and we know that the world today is a far more mobile place, or hopefully it will be again very soon. When people are moving, we want that brand to be synonymous with quality wherever they are. We'll take the local knowledge from the areas we go to ensure that we're always learning from the people that understand the market. Like I said, if there will be little adjustments to it, ultimately, the product will be very similar, so people will understand who we are and what we do. If you think about Trupanion for the last 21 years, it started in Canada. It basically started in British Columbia, around the Vancouver area. It just happened to be where I lived. Over a period of time, we expanded east across all of Canada. If you've done business in Quebec or Halifax or Toronto or Winnipeg, or Red Deer or Calgary or Edmonton, Vancouver or Vancouver Island, we had to learn as a business how to adapt to a different region. In many cases, we live in a regulated world where there's different rules by provinces. There's definitely different rules by states. When we entered the U.S. market, we bought an insurance entity. We were licensed in about 12 states, and then eventually got licensed in all 50. Each of those have different set of rules. Each of them need to be priced differently. In each area, we need to build relationships with the veterinary community. To me, it's not a significant difference if you're taking Western Europe and you're picking a bunch of countries versus the States. Sometimes there's some language complexities. I think if you enter a market like Japan, China, I think those are a little bit more difficult, if you're not using letters, if you're thinking about exporting your technology. I think the core of what we built the company over time, which is we've expanded by adding geographies. We just want to make sure that we have a pipeline of geographies to add in the future. We will pick that off primarily by country by country, because that's kind of how you would regulate it. Then each area would have their own business plan. It will be based on the same tenets and guardrails. Now, what's different about Trupanion today is, after 20 years, we are very close to being at operating scale. I would say that we are at operating scale, and we're right now choosing to invest more in our customer experience and a few technologies. When we enter a new country, we get, excuse me, to leverage all of our variable and fixed expenses, all of our technology platforms, the data that we had. I don't expect when we enter a new country that it's going to take us 20 years to get operating scale. In fact, after some early development expenses, which we've now paired out of our P&L, pre-revenue development expense, we should enter a country pretty close to being at operating scale. That's a big advantage that we weren't able to do historically, and one of the reasons that we've waited as long as we have to do more international expansion. Is that good for you, Elliot? It is. Those were my questions. Thank you. Good to see you all. Thank you. Thank you. Looks like we have a question from Nick Martin. Nick, I'm going to go ahead and bring you over. Hi, Nick. Hi, can you hear me and see me okay? Yeah, we can hear and see you great. Fantastic. Thank you very much for doing this. It's always great to see you, albeit virtually. It's not as good as in person, of course, but it's certainly better than nothing. Darryl, I love reading the shareholder letter. Always very comprehensive. One sort of takeaway that I had this year, you noted an increase in the intrinsic value, I think you called out about 88% in 2020. The way I read that was the sort of operations of the business maybe, was maybe 25% of that, then a large proportion was a reduction in the discount rate. I think in the 2019 letter, you very comprehensively laid out your calculations for that, I think you used 10.5% in that year. It'd just be good to hear a little bit about why that discount rate is coming down. Obviously, the business is greatly de-risking almost day by day, so I'm sure that's played into it. Also, within those same two letters, I think the terminal year in the 2019 letter spoke of about, I think it was 2.3 million sort of pets. Now you're talking in the new five-year plan about 3.5 million, which is obviously your opportunity set and your optionality seems to be greatly improving. It'd just be good to hear a bit about that and whether that's because of the international side, which you've obviously spoken on already. Also, you've got these two new direct-to-consumer brands, which I think is widening your net, and I think you're trying to increase your sort of conversions with your good leads that you've had as well. Sorry, it's a bit of a couple of questions in one there. It is a great question, and fortunately to my right, we have the person who drives and owns our model. Trish and I have spent many years working and fine-tuning the model and it helps drive almost all of our strategic decisions. I'll let you take the first crack at answering that. Sure. I'll focus on particularly your intrinsic value question. Yeah, we outlined our strong performance and increasing it 88%. 29% of that was related to the continued execution of our core business model, and really updating our model for our performance in 2020. We project the future. This is a reminder for those who are less familiar with our model, and that was in our prior year shareholder letter. We project the future based on what historical average is, rather than speculating on what could happen in the future. That was 29%. Then like you mentioned, we looked at our discount rate, which historically we used a 10.8% discount rate. Based on the continued, just consistent execution of the company, the inclusion in the S&P 600, and other milestones really, in terms of our model having a small company The discount rate is made up of a variety of factors, and one is a small company risk factor, which we hadn't changed since we created the model many years ago. We reevaluated, looked at data and other qualitative factors and brought the discount rate down to 10% in the updated model. We did not move it by large amounts. We moved it by what we felt was very much substantiated by the various data points and circumstances. Now I'm not remembering the second part of your question, so maybe Darryl will answer that one. Let me finish up on the model side. A lot of people have said, "Well, what are you speculating is gonna happen from some of these other initiatives?" They are initiatives because we think that they can have a material impact on our business, each and every one. If they can't have a material impact on the business, we're not wasting our time on it. Although from the outside perspective, it may look like we're trying to do a few more things. If you saw the number of opportunities we have in front of us, we are really taking a very small slice. We're taking things that are not easy, quick wins that will fizzle out after one or two years, but things that can grow for 10, 15, 20 years consecutively. If you layer all those things on, it kind of goes back to the first question of the day. You can either speculate on what all of those things may or may not happen and when they would, or you could say, "You know what? I think I can lower the discount rate." There's a higher likelihood of having sustained growth rates that they've already consistently delivered year after year after year, going out further as long as they have these additional growth levers. The other side of it was, with COVID, was the first time as a publicly traded company that people had an opportunity to realize that pets are not disposable or discretionary. These are non-pet owning, loving people. There are people in the investment community that said or felt, "Oh, in an economic downturn or in a recession, people are gonna cancel Trupanion." What happened in COVID is the exact same thing we've seen in regional problems or 2008 or 2009, or in the dot-com crash, or 9/11, regional downturns. The pets are a critically important part of the family. It was the combination of month after month, year after year, quarter after quarter, being able to consistently deliver. Sometimes our net pet growth is a little higher, sometimes a little bit lower, but our revenue has been very consistent. Right now it's on a little bit of an uptick. For all of those reasons, we felt like it was appropriate. I will point out that we also use the intrinsic value model to determine if we're going to share any of the value with the team that helps create it for our shareholders. The only factor that we used for that was that 29% on the execution side. The outside factors, the length of time we've been in the business, the consistency, wasn't something we felt like we should be bonusing management team with. Fantastic. In my second part of my very long first question, which is about I don't know whether it's a change in tone, but I think within the 2019 letter, I think the sort of terminal value calculation after 15 years is based on a couple of million sort of pets, but it seems that the canvas that you're now painting on is a lot broader with the five-year plan. I was just interested whether that was an international aspect to it or whether the two new direct-to-consumer brands that I think you're suggesting is going to help improve that sort of conversion you have from the sort of the leads for them that has come improved and your much stronger marketing and sort of customer awareness? All right. I'm going to try to answer this question, and Trish can pull me aside if I screw it up. Our intrinsic value model has no future projections in it based on anything that is speculative. We don't have a single pet in there for Japan. We don't have anything in there for any of those initiatives. When you saw an increase, it was because we used the inputs of the growth rates on the number of ACAP hospitals, same-store sales from the three-year trend prior. With the growth that we had in 2020, when you add that onto the list, it brought the growth rate up in the future. Yeah. The only thing that I would add, as you said, the model does continue to add pets and get to a larger number every year that goes by. One of the things we look at, because we want to make sure that the model makes sense, and that we feel comfortable with the outputs. We always look at, particularly currently, we look at within the North American market, U.S., Canada, where we are, what level of penetration in each year, what level of total insured, what level would our market share be, what level of penetration would that be, and does that make sense just within the North American market? You're not getting to necessarily, in the outer years, levels that make us feel like it's unrealistic if we continue to consistently execute. The fact that we are expanding into new products, expanding into new geographies, and we haven't updated anything in the model to reflect that, frankly, gives us even more confidence in the numbers that are currently in the model. Of course, in the future, as we see real numbers come out of those initiatives, we can update the model accordingly. That's generally how we look at it and make sure that it makes sense with the opportunities we have today. Fantastic. Thank you very much. We're going to go ahead and take a question from Greg Gibas. Hi, Greg. Hi, one moment. Sorry, just had to go on mute. Can you hear me okay? We can. Great. Yeah, your camera's still covered up. Unless you didn't brush your hair this morning or something. Yeah, didn't want to scare anyone here. Good morning to you all. Thanks for hosting this. I guess first, was just kind of hoping you could discuss your future plans to expand into worksite benefits, and maybe how you're going to leverage your partnership with Aflac there. Maybe you can discuss the timing of that launch and what that part of your business could then contribute from a financial perspective. Trish, why don't you? Yeah. Hi, Greg. Good question. The Aflac activity kicked off pretty much as soon as we were able to work with them in October. They are a very well-aligned partner, as you can imagine. The stages, we've got kind of three real phases when we think about North American worksite benefits, specifically in the U.S. market. We have the direct-to-consumer play, which we mentioned earlier this week. We have launched on aflac.com to drive traffic to Trupanion. That's our first foray into a partnership together. Really kind of learning about the volume of traffic organically coming to Aflac looking for pet coverage, learning how we convert those leads. Getting an early stage of, okay, how does this work? How does it sort of support things? That's kind of from a partnership point of view. We're also simultaneously building out specific products for their direct-to-consumer play, the worksite benefit play. We wanted to try and understand the traffic and just see if it's a little bit different as a distribution channel in general. What we're doing, ideally, we'll be looking at launching early in 2022, in Q1. We'll have worksite products that will be sold through brokers and on platforms initially. Slowly to start with as we learn more about that data, and at the same time, we'll have an Aflac Powered by Trupanion product that will sit on aflac.com, direct to consumer. We expect over the course of the next five years, as we think about our 60-month plan, that this is going to get to $100 million of revenue. I think the collaboration between the teams, there's been a lot of foundational work done very quickly. We're really happy with that timeline. The third phase, outside of having direct to consumer and the worksite benefits to the bigger brokers, is engaging with the Aflac agent. That's going to be happening in 2023. The plan there is to have a product that will be sold directly through those small businesses. I don't know, 48 months, we should have some nice data coming through, some decent revenue, and seeing some growth through that partnership. Does that answer your question? Yeah, very much so. Look forward to the data coming from that business. Thanks for the help there, Margi. Yeah. Thanks. If I could follow up, regarding your marketing channels, it seems like on the earnings call and then the latest annual report, continuing to see a solid amount of improvement in leads and in conversions across all the channels, particularly online and Breeder you talked about as well. I was just wondering, I guess, where you see the most opportunity for future continued marketing improvements or maybe what you're most excited about there for lead and conversion growth? Yeah. We're excited about them all. I think, when everything is trending upwards is what you want to see for any of them. It's really a case of as long as it's hitting that return. We're always looking at that return. Charging between the 30% and the 40% going forward. Looking at Breeder, as you mentioned, Breeders had tremendous growth for, say, the last four years. It's really kind of picking up that pace. It continues to. That's exciting. Social media is exciting. I think the vet channel continues and always will be the foundation of everything that we do. You've got a whole host of different distribution channels that are coming to play. I think the difference that we have today is that acknowledgment that we are creating that brand. When we think about, we've historically thought lead and convert, and you've got some channels that are very lead heavy and some that really just help to continue that conversation. What we're finding now is the interplay between them. When we think about a distribution channel, we're thinking about a channel through which a pet owner hears about Trupanion and insurance for the first time. We're not thinking about picking up that conversation halfway through. Historically what we were doing was we were driving a bulk of the leads into the market because of our relationships with the veterinarians, because that first point of contact with any loving, responsible pet owner is that conversation, "Hey, you should think about insurance." There is a brochure for Trupanion or there's an exam day offer. What we're seeing now is the vet is playing both the lead and convert conversation there. They're introducing it, but they're also having people coming in with their new puppy and kittens, and they're then reinforcing and then helping us to convert those leads. That for us is a real shift that's really exciting. We haven't even explored all the distribution channels that we can go into yet. I think, when we think about what's most exciting, it's what's coming up. We're always looking very granularly at every channel that we operate in, and it's really, how much can we put more investment in, continue to see those returns? Really excited to see conversion rates still going up. Really excited to see access to the e-leads platforms that we're working with to get the conversation going with every single pet owner in the market. That, like I said earlier, is the thing that's probably most exciting to me because if you have that conversation, at some point in their journey, they're going to come back to Trupanion. They're going to hear more about what we can do for them. We're just going to keep growing. I think, we have a lot of tools now, and there was a time when we would try something and it didn't work. Now, maybe we're on a hot streak and we're trying things and they're working really well, but we'll just keep learning and keep building. The expectation is we can continue to deploy more of that capital as effectively as we have done in the last few quarters, and just keep going from there. Darryl? Nothing to add. Yeah. That's helpful. Yeah, it's great to hear. Very helpful. I'll pass it on. Thanks, guys. Thanks, Greg. We have a question from Emily Brill. Emily, I'm going to bring you over. Hi, Emily. Emily, you can go ahead and unmute your line. Hello? Can you hear me? We can. Hello. Okay. All right. I'm good? You're good. Okay. This is a two-part question for Darryl. I have a question about the expansion in the lower-tier products that you talked about in the 60-month plan. Regarding PHI Direct and Furkin and expansion more generally, we know historically sometimes when great companies that do great customer service expand, the core business suffers and customers feel the streamlining effects. How do you plan to do quality control on two products that are inherently lesser without hurting the core brand, Trupanion? I see that you said it's going to launch in Canada, but what does that mean for Trupanion members? Are they now going to be sharing their customer call center and their claims people with Furkin? I think that's the first part of your question. You got another one after that? One. I'll answer that one first. It's a great question. This concept or idea is not new. If you go back to my 2017 shareholder letter, or maybe 2016, we outlined potential growth channels. We are specifically not going onto Trupanion or Trupanion's website and offering bronze, silver and gold. We are not going to be in any way watering down our levels of customer experience or the value proposition that we bring with Trupanion. In fact, you'll see over the next year or two that we're actually turning up the customer experience for Trupanion, our expectations on how fast, how quick. In our six-month plan, we talk about increasing the value proposition and actually broadening coverage. The idea with the PHI and Furkin is to have completely independent brands in no way associated on a same website. We're not going to be cross-selling. We're not going to refer one to another. These brands would live on their own. The reason that we're bringing them to market is we believe we've been generating, maybe call it 50% of the category's leads. The consumer has been seeing about 20 different brands to choose from. We have been one of 20. Over the last number of decades, we've actually competed against 57 different brands. Every year, typically two or three, four come in, two or three get merged, they go out of business, they get acquired. From a consumer's perspective, we've always been one of 20 brands. Now we may be driving a lead and some of those people end up converting with a different brand. The other brands typically say this, "Come get a quote. Look at the price. They give the impression to the consumer that all of these products and brands have equal levels of coverage or equal value proposition or equal service levels. What we're doing with these products is bringing them to market. First and foremost, they will have the same value proposition as Trupanion. We will be targeting $0.71 on the dollar or $0.71 going to the average pet owner back, which we believe is the highest sustainable level in the category. First of all, if you had an apples-to-apples product, we would typically be 10-12, 14% cheaper than any of our existing competitors if it was apples to apples. With those brands, we are actually going to be very transparent to the consumer so they understand why that product is cheaper. We are going to explain to them, "Listen, you can get products that maybe have twice the average monthly cost, but they have considerably more coverage. The reason we're able to offer this one to you for less money is it has these limitations, and you should expect these levels of service." We will be sharing on the backend technology systems. We will be sharing our finance department, our legal department, which will allow those brands to get to operating scale quickly so we can offer a good value proposition. From a marketing perspective, they will be completely independent brands. They will be sold and marketed only through online channels. For those people that are searching for cheap pet insurance, they never found Trupanion before. They may find these other brands. For somebody saying, "I am looking for just one year of coverage. That's all I care about. What's going to happen? My life's going to be different later, we will have products available. It's similar when we talk about Aflac or other distribution channels like State Farm. We think we have the skills to create products that are right for every distribution channel. The Trupanion product has been designed to be sold and recommended by veterinarians. It has the broadest amount of coverage with the least amount of restrictions, best value proposition, and the best customer experience. If you're a veterinarian, you want a very simple plan that covers everything that allows them to get the proper level of care. If you are running an HR department for a company with 5,000 people and you have a budget to provide pet insurance to all 5,000 people, you may not be able to afford the best coverage, but offering something is better than nothing. Us creating the right products for the right distribution channels is key. We will not in any way create brand confusion. We actually believe we will be making swim lanes between the products that have low coverage and low price and those that have medium coverage and medium price, and then Trupanion, which really we think swims on its own. Right now, a consumer looks at it and it's more confusing. Ultimately, we'll see how it plays out. Your answer is yes. Trupanion members are going to be sharing their customer service with Furkin? No. The answer was when we talk about technology systems. Yes. When we talk about our finance department, when we talk about legal, accounting, the fixed expenses that we run in the business, yes. They don't know which bookkeeper puts something in a line item in an Excel spreadsheet to make sure that we have a balanced bank account. What will matter is the service levels, right? Trupanion will have the best service levels. These other products, we don't pay the hospital directly. Trupanion, we pay the hospital directly. Okay. Very distinct product coverage as well as customer experience. So- Does that make sense? Yes. Let me get to the second part of the question, though, is I'm very intrigued by how you framed the rationale for launching the 2-tier products. You said, in short, we know that some customers may enroll in brands other than Trupanion, that's okay if they're informed and understand the difference in coverage. If that occurs, we want them to make an educated decision and enroll with a brand we own, that provides high value and is not misleading. What did you mean by educated decision, and who's going to do the educating? How do you educate consumers and make sure they understand what they're getting in the lower tiers and what they're not getting? Darryl just directed I'll tell you this, Emily. It's a great question. What we're planning to do is, when you think about the swim lanes and we think about the different value, and the breadth of coverage you get from a Trupanion versus a Furkin versus a PHI Direct. At the moment, we believe very strongly that Trupanion is in a class of its own. How do you articulate very clearly that you've got facts to be able to say to a consumer, "If you're looking for all of this coverage, this is what you're going to get for Trupanion. If you're looking for this coverage, which is less than Trupanion, but it's still really good, and it's basically competing with the majority of the market, you're going to get this coverage. You're going to pay this much. If you want something that is peace of mind, but it's not going to give you the breadth that the middle product is going to give you, it's not going to give you the breadth that Trupanion is going to give you, this is what you get. When you compare them with facts, and you build them transparently to acknowledge there are different products out there. To Darryl's earlier point, if you're going to get a quote, you can't compare a Mercedes with a Prius. Different cars, different brands. It's the same with the products in the market today within insurance, but people don't understand it. What our job is, as a leader in the category, is to ensure that we are very clearly articulating the differences between the benefits you get with one product and another. Our hope is, if we're talking to all of the new pet owners that come into the market as Trupanion, we'll make sure that we clearly articulate the differences between Trupanion and PHI and Furkin. Hopefully, we are driving that awareness in the industry and educating people the facts are out there. We're hoping we will convert more of those products than other people. The chances are that as long as they leave us and they have a clear differential to know that Trupanion might be a different price for this product, and this is why, then we think we're doing our job the right way. Hopefully that answers your question. It's really when we think about our marketing channels and we think about the messaging, we think about we're in charge of the messaging from a perspective of what goes on the trupanion.com website is what a pet owner will see. We now have every single detail about PHI and Furkin, and we can be very factually accurate about the comparison between the products, and being very transparent. The way that we're approaching the PHI and Furkin delivery is with the same transparency. Not going out there and claiming to be anything we're not. For some people, they will instantly be like, "I don't want to touch that product because it's not as broad as I need." That's fine, but at least we're showing that. Potentially they may look at Furkin or they may look at Trupanion. Then just to touch on the earlier question as well, related to the customer services and customer experience. Those products are not being managed by the same people. Completely separate teams, completely separate brand identities, completely separate expectations for them. The Trupanion brand is and will always be absolutely high quality, and we'll continue to invest in that member experience because we've built this company based on that brand value, and we will not let that go. Does that answer your question? Yes. It does, except just sort of to drill down on how. They're lower tier products, how are they going to be cheaper? Are they going to have $10,000 lifetime limits? How do you make sure that these people understand the difference between those products and what we all know is a product that actually does something if your dog gets sick. Emily- We all know that a $10,000 lifetime limit is useless in insurance. Yeah. How do you make sure they understand the difference? Emily, our job as a company is to solve problems for pet owners. It also involves educating. It is our job to properly educate and inform a consumer so that they clearly understand in a very transparent way what they're getting and what they're not getting. For us to have one product that has a cost of goods of $50 a month for the average dog, and another one that has a cost of goods of $25, it's not hard for us to build that product. What we do is we take away coverage. You keep taking away coverage until it goes from $50 down to $25. It is imperative that you explain what you took away. If the consumer understands what was taken away and that's what they'd still prefer at the end of the day, okay. It is very important that we are transparent to the consumer and educate them. If you can imagine, right now, a consumer, if they're searching around, they look at 20 different brands. Those other brands are not saying, "Oh, by the way, the reason we're cheaper is because we don't cover this, or this, or you have a limit or a cap, or the fact that your rates are going to be four and a half times higher than they are today because your pet hit the age of seven or eight." I'm not telling you any of that information. My hope and my expectation is that you'll never read the fine print. Yeah. We will debunk that theory. We will be going to the market and informing and educating them on what is covered and allow people. What will happen now, instead of there being Trupanion and 19 brands, there will be Trupanion and 22. Our two new brands will cannibalize the other 19 to a certain degree, because we will do it in a transparent way with ultimately a better value proposition because we will share the operating scale. If it succeeds, great. If it doesn't succeed, that means that there is no company in the market that should be able to do it in a long-term sustainable way. It doesn't have to be a roaring success for it to be a great success for our aggregate strategy of the business. That sounds great. I'll be watching to see how that goes. Very interesting. Okay, great. We have a question from Gotham. Gotham, I'm going to bring you over. All right, Gotham, you can go ahead and unmute your line. Okay. Can you guys hear me? We can hear and see you. Okay. I should give a call-out to the tech team here, making all of this work as well as it does. Yeah. Thanks, everybody. It's awesome. First of all, thank you for hosting us, and I look forward to seeing you guys back in Omaha next year, hopefully. Yeah. We'll be there for sure. I think our rooms are already booked. Great. I'm a tech founder of a startup, this question is kind of biased, but I appreciate your perspective on this. While I obviously think about Amazon, Berkshire, and Costco as great exemplars to understand Trupanion, I was wondering if there are any newer businesses, specifically subscription-based, SaaS businesses, technology businesses that are catching your attention, either from a business model culture or execution standpoint that you see as doing something very interesting to get inspired from? The reason I'm asking this is, I'm interested in what I'm seeing as increasing returns to scale from technology of these businesses, right? If there's something that you guys are thinking about as you scale over the next decade. Any thoughts would be really interesting to me. Well, I'm not going to go into these companies' business models in detail. Constellation Software is an interesting one to look at. Obviously, the people have executed well on their strategy. This isn't a small company that I think you're looking for, but if you want to talk about a monthly subscription business that has pivoted very well, that I found very intriguing, was Netflix. They've made basically three pivots. That's interesting to see companies do that. I'm not saying that needs to be an aspirational goal. I think they did it for their own reasons. I think there's a lot of interest around monthly subscription for all the right reasons. It's easier to manage a business, right? It's easier. We internally, people will say, "Oh, we'd like to do this or to get or whatever." If we say, "No, we don't have the money today," but don't worry, three, four, five months from now, we'll grow into it. I would say picking monthly subscription businesses that have a very large under-penetrated market is very different than a lot of SaaS companies and subscription companies that are going in and trying to disrupt what is already a business or a category. We ultimately are trying to build a category. We spend very little time thinking about competition. Our hardest critics are ourselves. We're always trying to make our product better. We're always trying to improve our customer experience. You talk about Costco. Costco's the ultimate monthly subscription company. They make their profits off of their membership fees. They know that's how their business model works. Where they're going to provide the best value for the customers, make sure that all their employees are treated well and paid more than others, make sure that they have a work environment, a safe environment, that they do everything in a legal way, and then make the money off the membership fees. I study a lot of subscription businesses when I see them to try to understand if there's something new. The core tenets always come back, right? The single most important thing is retention. Okay. Retention is it. The next thing is lifetime value. A lot of people will talk to us about pets. They'll say, "Well, you can enroll 10 more pets or do something like that." Well, you can't spend pets. You spend revenue. You need a margin for each of those pets and a lifetime value to be able that you can reinvest more of those. I don't know if I'm directly answering your question. You can certainly hit me with a follow-up. When I look at or study other monthly subscription businesses, I'm always intrigued on, are they playing in a completely different ecosystem, and have they had to do something very different than what we have? When a monthly subscription business has been around for three, seven years, it starts to go down the same pathway. You start saying, "What is the data that I need to understand to improve retention rate? What's the data that I need to understand to improve the lifetime value?" That's it. Do you have any ones that I should be writing down and studying? Well, I'm interested in the consolidation between us, which I'm trying to understand from the European market perspective. If you don't mind, I have an unrelated follow-up. Okay. What are your guys' plans for India? You know. I think pet adoption and trending go up through the roof there, and obviously visiting regularly, so was wondering your take on that. Yeah. It's interesting. A lot of people would not intuitively think that India would be a good market for us. The middle and upper income in India, which is similar to the middle and upper income in Canada in size, and Canada's a great market for us. We would love to be able to enter India at some point. We've done actually quite a bit of research over the last 24 months on India, and one of the challenges that we have right now is on the government side. There's a lot of protectionism around putting up barriers for new companies to be able to come in and get going. The amount of cash or assets that would be required for us to enter are, right now, prohibitively high for getting the rates of return that we would want to get. That's a market that's always developing and changing, and we'll keep our eye on it, and maybe there'll be a partnership or something else that can help us get into it. Yeah. We look forward to being there someday. I wouldn't expect it's going to be in the next five years, if I was going to make a big bet, but in the next 10-20, we'll be there. Okay. I'll just end with one anecdotal data point. My office in India is across a pet clinic, and I see these cars pulling every day, and every one of them is a Bentley or a Mercedes or a Jaguar, so all the best to you. The market potential is there. That's my point. Great. Yeah. We're excited about the market. There's a lot of markets. Brazil is a market we're very interested in. We've done quite a bit of research into Mexico. Some of them, we think it's maybe a little early. Other ones are not obvious. India, for example, is not obvious to a lot of people, but yeah, we think India could be really good. We just got to figure out the government regulations. Okay. Good luck. Thank you again. Thanks for your question. Great. The next question comes from Stefan. Stefan, I'm going to go ahead and bring you over. Okay. Stefan, you can go ahead and unmute your line. Sorry, can you hear me okay now? We can. Yes. Hello. Okay, wonderful. Well, thank you so much for hosting the Q&A. Appreciate it. Thanks for building the tremendous value over the years, both for the vets and the pets, and the shareholders, too. So much appreciated. My question relates to growth. You've done a tremendous job growing the company. With insurance, of course, with growth comes capital requirements. My question relates to how do you find that balance between pet acquisition costs and raising capital through share issuance? It's a really good question. We are a company with our unit economics and our guardrails. If we have roughly 13%-15% adjusted operating income, so that's a profit from an existing client, and we have internal rates of return between 30% and 40%, we can self-fund and self-grow the business 20% year-over-year, over- year- over- year. We can self-fund that now forever. When we grow at faster rates, if we grow at 30%-40%, then the first place that has cash flow constraints is our money to acquire a pet. You say, at a 35% internal rate of return, the midpoint of our guardrails, how much do we need to deploy to grow at 30% a year or 40%? You can do the math on it. At a certain point, you get in a situation where our adjusted operating income in a month, you're spending more just to acquire a pet. That number is closer to the 40% range. Margie and her team, last quarter, we had a record in our adjusted operating income. It was up 40% year-over-year, and we were able to deploy 100% of it at a 35% internal rate of return. The only thing better than doing 100% would be 120% or 140%. In those scenarios, you end up being cash flow negative. You can put it into an intrinsic value model, and you can say, what is the additional value creation by growing faster? Then how much capital would you need to raise to be able to afford that growth? You divide it by a greater number of shares, and if that gets you a better year-over-year value creation than growing at a slower rate, then you choose to do that, as long as you believe that you can execute, meaning that you're not growing so fast that your customer experience is going to drop, and it's going to give you a long-term bruised eye on your reputation. We look at that balance, and for many years, we put a guardrail of being cash flow positive. Now, I didn't care if I was $1 cash flow positive or $5,000 cash flow positive or $5 million. It just meant that we needed to be cash flow positive. Last year, we really strengthened our balance sheet and our cash position. We can grow today 40% year-over-year for two years and fund the growth at a 35% IRR, as well as the capital required that departments of insurance make sure that we keep money in a bank account just in case every dog got hit by a car on the same day. We could do both of that, and we will always try to maintain that we have a good runway ahead of us so that if we have accelerated growth, we're able to take advantage of it. There is a tipping point, and we manage it and watch it very closely. By the way, growing is really hard. Adding 30% more people every year is really hard. What's harder is to grow erratically. If you grow consistently year after year, the company can get into a rhythm. Considering at this table right now, if we were a company that grew 5% or 10% a year, I don't know what we would do all day. It would be a very different feel. We just need to monitor and measure it. We have used other financial instruments in the past to cover the capital requirements. You can use methods of reinsurance, or you can use some form, like basically a line of credit and service a line of credit. Both of those, if they come with the right terms, and they don't have any bad covenants, and they give you the flexibility, and it's a long enough window, and you understand it doesn't put the company at risk, I think are good alternatives as well. If we enter periods of accelerated growth for three or five years consistently, at a certain level, we may want to use those instruments, or we can use it with equity, and we'll make that right balance to answer that question at the time. That's how we think about it. That's perfect. Thank you very much. That's an excellent answer. Much appreciated. We have a question from Jonathan Block. John, I'm going to go ahead and bring you over. Hi, John. Hi, John. Good morning. Hopefully, you can hear me okay. I can hear you great. Darryl, for you, the first one, just why now for PHI and Furkin? Talk to us, is it because of the timing, the company's reaching operating scale, or at least becoming closer to operating scale? How do we think about the allowable PAC? Obviously, these products will probably have a lower ARPU. Do we think about a similar churn level, though, for these products if you are properly educating the customer? Yeah, great questions. You answered the first one exactly. The reason we're doing this today, I talked about it, wrote about it four or five years ago. The reason we're doing it today is we have the operating scale. Our technology is much closer to being able to support. It would have strained our technology before. We made an investment in technology at the end of last year that helps us, and that team's larger. That's a bandwidth constraint. The last one is the team size. Can we do this in a way that we're not going to distract from our core subscription business? We wanted to make sure that we could do that. Now, there's no guarantees we'll do that well. We'll have to monitor that and measure it. Operating scale was the biggest challenge that we had historically from doing it. Those other two from technologies and systems, and then people were the next two things that we looked at. Your lifetime value point of view or question is exactly what we expect. We expect, in general, the lower the ARPU, you typically have lower retention rates of the number of months a pet will stay with you. You multiply that by even the same margin profile, which we plan on operating all of our subscription businesses at the same margin profile. It will produce a smaller incremental dollar multiplied by a smaller number of months. The lifetime value will be much, much smaller, and therefore our allowable pet acquisition spend will be much, much smaller. Our point of view is that we will be very disciplined. We will not spend $1 more than what will get us the internal rates of return. If we can't make that work, no competitor should be able to make that work in a long-term, sustainable way. If we are able to make it work, good for us, and we get all the benefits of doing the education. Trish, do you want to add anything on kind of the LVP side of it? No. I think it's very well said. Obviously, John, to the extent that our education process yields higher retention, we'll update our models for that. We definitely are just going to be very disciplined in ensuring we hit our targets. It's very important to just remember, these will roll into our subscription business. Mix of business will obviously impact some of those metrics moving forward. Okay. Maybe a follow-up to that one real quick. Just one thing that I'll bring it up, and then I'll hand it over to Margi. What a lot of people don't understand is we've had literally over 1,000 products in the marketplace for a long time. We have a deductible that could be anywhere from zero to 1,000. We have price ranges over a million different price categories. Forever, we are understanding the lifetime value of a golden retriever in N.Y. versus a labradoodle in Kansas City. Margi's team has done an exceptional job of targeting the right pet acquisition spend depending on channel, pet, et cetera. It's really hard, and we don't do it perfectly by any means. I think we do it well, so we have that skill. Do you want to add anything there? I don't know if I left anything out. No, you didn't leave anything out, really. No, I have nothing to add. Well, maybe I'll give you something, Margi. Just as a follow-up that I think investors think lower-end plans, and they get worried about churn, right? You guys have done a great job of retention on your high-end Trupanion plan. Darryl, the way that you were describing it to an earlier question, it seems if you guys can do a better job upfront with educating the consumer, right? Really telling them what he or she is or is not getting for that particular plan. We shouldn't think about these offerings, PHI and Furkin as, call it, industry-like churn rates, right? You can still get pretty good retention as long as you're properly educating them upfront. Maybe not quite as good as your, call it, high-end gold-plated Trupanion. Long-winded way of saying, Darryl, should PHI and Furkin still spit out, call it, better retention rates than a lot of the other competing products because you are making that concerted effort around educating upfront? We anticipate that we will hold a pet longer than the industry will for a similar price point. Yeah. Typically, the lower the price point, on average, the lower the number of months you'll keep them. That's what we would expect. We'll monitor it and measure. We don't really care what others are doing as far as that, our expectations going into it are exactly what you just said. Okay. Last question from me, sort of a 5-to-10-year question. You mentioned the dental industry. It's another area that we follow. There's dynamics with consolidation with practices, and some of that is very similar to what you see in the veterinary world, Darryl. I'm just curious, what are you seeing, you talk about the active hospitals in the shareholder letter. What do you see with the big corporate practices versus the independents? Are some more likely to embrace or, call it, endorse insurance? Are some of these easier to grow your business versus the others? When we think about consolidation in the veterinary world, which seems more likely to continue, is it a tailwind or a headwind for your business? Just would love your long-term thoughts there. Thanks guys. I can answer this one. I'll get there first, John, and he can fill in the gap. Consolidation absolutely is happening. It's the thing that we see across the country and into Canada as well. If you look at markets like the U.K., 80% of the veterinarians are owned in consolidated groups now. We expect the market to go in a similar fashion. We have partnerships with probably 95% of those groups right now. In terms of the economics, when you start talking about the increased client retention, the increased revenue, the ability to see that client when they walk in the door, there's no barrier to the pet owner going to see the veterinarian. When you're speaking at a corporate level veterinary group, the balance is there in terms of what's the impact on the P&L, what's the impact on client retention, what's the impact on average premium or average income. They appreciate that. They get the numbers. It does help. It can help in many instances because there's a better education process, and a lot of them have a central system from a software point of view, so it's easier for us to work through there. At the end of the day, though, the reason we have our territory partner model and the reason it's so important is because you can have all the corporate conversations you like, but you have to speak to that veterinarian and their team at that level. No matter how consolidated it becomes, that still is a main part of our overall program of education from a veterinary level, and that relationship and partnership has to happen in that hospital for anything to be truly effective. It's certainly not a headwind or a tailwind. I think it's helpful. We have partnerships. We can work with them, and we can look at data points together and make sure that we're actually helping to drive the care in an appropriate fashion. We talked earlier about if you've got industry trends where there's new pharmacy coming through, new treatments, new diagnoses, we want to make sure that we've got that in our coverage, so we're always prepared for that. That helps us. I would say that across the board, every partnership we have adds value to us in one way or another. When we think about our model and how the territory partners play such a massive part in that, the corporate level is really just another layer. It helps, it doesn't hinder. I think you've got some groups that are more aware of the impact of insurance than others. We as a business have a strategy focused on that, and we've made fantastic progress over the last five years. We'll continue to work with them at a corporate level. Like I said, the independent veterinarian and the localization of where the territory partner is, if you're not communicating at hospital level, you can have all the corporate stuff going on in the world, but you're not going to change behavior in the hospital. Does that answer your question? Totally does. Great. Thanks, Jas. Appreciate it. Thanks, y'all. Great. Looks like our next question is going to come from David Reville. David, I'm going to go ahead and bring you over. Hey, you guys. Hi, David. Hi. Thanks again for doing this. How are you? As always, your annual letter, Darryl, was a lot to read. Sorry about that. Really fun. No, I love it. I think it's terrific. We use it as an example. My question is about the 60-month plan and sort of, you have always been, in the past two answers, you've given us a primer about how you think about investing in PAC and how your existing results guide and create the guardrails for what you invest in PAC. Can you talk about how you think about these long-term initiatives in terms of what you might invest pre-revenue? Obviously, if some of these things take off, all of us will want you to pour the gas on as fast as it can be profitably ignited. You've talked about that you will have pacing, that all these things aren't going to start at once. How should we think about what you'll be willing to invest in these projects over those five years, given what sort of intermediate expectations for the base business? I had a board member say this to me years ago, which I loved. He said, "Darryl, you're not betting the farm. You're betting the outhouse." That's probably about the level. You can think about it as a percentage of our adjusted operating income for a year. We won't go over a certain amount. We have a similar kind of guardrail for stock buybacks. If our stock ever got really cheap and we could get a 35% internal rate of return, we would never, for example, spend more than 25% of our adjusted operating income. Those types of guardrails. It's a new muscle for us. The development expense is something that we'll watch. We're not really good yet at having all of the data and the metrics to say how are we doing and what's our return on it. Some will just strike out, and some will get to the point of getting to revenue. There's another area that we need to focus on, which is our CapEx spending too, and how we're measuring that. We'll just keep evolving our thinking and our models to stay consistent with the challenges we have in our business. Going to the earlier question about monthly subscription businesses, that's the benefit of monthly subscription businesses. You scratch your head, you say, "What about this? How are we going to think about it? What is it going to mean for us in the short term, medium term, long term?" You go, and you solve for it. We've got an amazing team. I'm looking forward. Our shareholder meeting will be in person. Hopefully, people are vaccinated. We will have testing on site so that people feel as comfortable as possible. We've got teams that are thinking about these challenges, thinking about these problems, and we've got other teams that can go out and find the answers. I think my outhouse analogy is about as accurate as you're going to get at this point. Yeah, I wouldn't expect you to have more. I guess I would say, partly from your results and certainly from your communication, you've built up a tremendous amount of credibility among your investors, I would imagine, and I know from the ones that we talk to. That makes perfect sense. I appreciate that. Good luck. I won't be traveling to Seattle this year, but I'm looking forward to seeing you in person as soon as I possibly can. Sounds great. Thank you. Thanks all. Our next question comes from Dawn Brock. Dawn, I'm going to go ahead and bring you over. Hi, Dawn. I can see me, so hopefully you can see me. Awesome. How are you guys doing? Good. How are you? I'm great. As always, thank you for the forum. It continues to be unique and refreshing to see the runway for the value proposition over the next 60 months and, as I hear you talk, probably more like 200 plus months based on the opportunity you've got. Throughout this conversation, you've touched a lot on technology and scalability. By the way, I love the new tagline, Powered by Trupanion. That's pretty brilliant. Along those lines, I kind of wanted to focus on the proprietary software side of the value proposition. Trupanion Express has obviously evolved. Understanding that there's still penetration potential in North America with the account manager kind of package, what are your thoughts around integrating this element or even another tech-enabled element into your new geographic aspirations? I guess I'm wondering if you consider it to be critical to scaling and to translating and to supporting the value proposition, or if you're thinking more along the lines of a different localized selling strategy. We made a very large investment for us last year. Right. About $20 million in a technology company. Hopefully our actions speak that we think the technology is critical for us to be able to not only execute on our 60-month plan from a support mechanism to be the low-cost provider, have the best customer experience, but also to have platforms that allow us to have more products in more channels with the ability to measure and monitor what we're doing. I think they're critical. Let me kind of get Margi's point of view on the lead side of it and what we're thinking about on the growth side. Trish really runs on the operation side and how we're thinking about, in some cases, sharing technology platforms and then investing in others. Yeah. Hello. When we're thinking about growth, you mentioned the account manager model and how we're layering on there. That model has worked really well because we have the territory partners, we have the software, and we have the account manager. While they're people, not technology, when we think about that package, it does work very well for us. Anything we do in growth terms where we're looking at new geographies, new regions, we'll be trying to replicate as much of that as possible because we know that it works. In the event that as we look at building out the software, we're always trying to evolve it, make sure that experience is relevant for the market. Part of that investment we're looking at over the next 18 months to two years at least, is really not only improving it for the North American market, but making it more appropriate for each localized area we go to. There'll be some commonalities in there, but they won't always be the same. Technology, our ability to pay the veterinarian directly at the time of checkout very quickly is incredibly important as a value proposition. That isn't going to go away. That, in any market, will put us head and shoulders above other players. That's something that we'll continue to drive and invest in because we believe it's very important to us to differentiate ourselves. It's a great experience for everybody involved. Trish? You want to add kind of on the scale side and then on the operations side? I think, Dawn, if I was understanding correctly, your question was mainly around our patented software. I'll primarily focus on, I agree with what Darryl said in terms of we've been making investments across the board to scale. Our patented software, and particularly like Margi said, our ability to pay directly at time of checkout is a core tenet of our philosophy anywhere we go. We want to be known as that company that is solving a problem immediately and not waiting to reimburse somebody who had to come out of pocket. Our patented software and the evolution of it is very critical to that philosophy. From an operations perspective, and our teams have been doing a lot of work, particularly in the past year, in our claims process to really have that foundational technology piece in place to ensure that whether we're processing here, Canada, Australia, other geographies, other languages, that we can quickly automate those claims, pay them at time of checkout. An automated solution provides the most scalability. We've been investing in that. Also how do we ensure if it's not, we don't have the ability to automate, we have the teams in various locations able to do so very quickly as well. I think that's one of the reasons we say why now, because we are much more capable of doing that now than we ever were in the past, and it's been a big focus. What about just the addition of the account manager? I know that has been really a critical component of the success. I guess I'm just wondering how that translates. Well, when you think about the account manager, it's really about increasing touch points. Ultimately, this is about us building a relationship with veterinarians and their staff and pet owners so that they can trust us. We don't have a tangible product. We've had a lot of conversations today about what's in the fine print or what's not. We need to ultimately be trusted. The more interactions that you have with individuals, the greater opportunity you have to build trust. What the account managers did for us was increase the amount of touch points at a hospital level. In the chicken and an egg analogy, if one pet's enrolled, how often are you going to see a claim? How often are you going to interact with the staff? When you get to the point where 10% or 15% of pets are enrolled in a clinic or a hospital, which we have examples of, we're touching them daily. There's a lot of interactions that are going on. The account manager allows the territory partner to go out and build those new relationships or not get caught up in the quick transactional conversations and get to spend the time talking about more of the long-term foundation. Why is this important? What are we doing? What's going to change? The account managers really help us with those day-to-day or minute-by-minute conversations. It is a really strong partnership between the territory partner and the account manager. We couldn't have done the account managers effectively five years ago, six years ago, because they didn't have the insight or the data that would be required to be supportive to the hospital. You put in our software, we see how many visits they're seeing. How many we paid directly. We get much more data and information to have a variable, a good conversation. I remember, 15, 18 years ago, we'd be going and talking to a vet hospital, and the territory partners would say, "What color is our next calendar map going to be?" Once you've already talked to them about what we're going to be doing and why we do it, what is the reason for having that next conversation? It was like, "Well, what's the next marketing piece I can bring in?" That's because at that point, there wasn't a lot of pet enrolls, and there wasn't a lot of transactions, and there wasn't a lot of activity. The account managers work when every single day, we are sending money to the hospitals and solving those problems. It's another little flywheel in our business. The higher the penetration, the better trust, retention rate, referral rates, conversions that can occur. We've seen it in our Canadian business. If our U.S. business grows consistently like our Canadian business does, the next 10 years are rosy. If you talk about other countries, the next 30 years from now are rosy. Getting the flywheel started is hard. Okay. Great. Thanks. If you could answer this just at any point in the next 20 minutes, it would be great. Because you're such a data-driven team, I am just super curious what research is driving your goal to reach $100 million in lands passed by 2025? Well, that's easy. About 40% of all pet spend is on food. In the U.S. alone, you could have a very tiny market share of not even the core kibble products, in just non-kibble products, to get to $100 million. One of the reasons that that area is interesting, are we going to be able to prove over the next 10-15 years that eating a healthy food is going to have a better health outcome? With that, it might give us the opportunities to partner with other pet food manufacturers or other companies, distribution, et cetera. On its own, the ability of if we can create something that is exponentially better and exponentially has a better health outcome, the two will reinforce each other. If it's successful, the odds of success are not super high, but if it is successful, you don't need much market penetration to get there. Got it. Thanks, guys. Market share, really. Bye. The next question comes from David Westenberg. Dave, give me a second, and I'll bring you over. Has Kristen moved lately? No, she's not leaving. Oh. Hi, Dave. Hi. How are you doing? Sorry, I've got a crying baby in the background. Sorry. This happens every time I attend your things, I think. I know you've gotten this question a lot. The part I'm struggling with is Trupanion itself as a product is very transparent. You pay 90% of invoices, you pretty much pay, unless it's a pre-existing condition, you cover it. When you dial back coverage and you also maintain transparency, I know you've answered it five different times, I'm just kind of confused what layers or what coverage you can roll back and still make it really easy to communicate the product. What I mean is it 80% a payout ratio rather than 90%? Is it a cap? I just need a concrete thing because if you tell me, we cover surgery but not drugs or something like that, it becomes a lot more difficult to communicate. Is what I'm saying clear here? Yeah. Dave, dialing back coverage is easy. If we wanted to decrease our cost of goods by one-seventh, we could say we don't cover anything on Mondays. What's important is that you would be able to articulate it. Communicate. Yeah. Execute on it. I'm going to torture you a little bit because we have not yet released these. By the time we get to the shareholder meeting in June, you'll see a little bit more of it. Rest assured, there will be an incredible amount of transparency. Okay. I'll wait. Just in terms of the other rev category, and I got this question yesterday, so I did want to ask this. The other revenue category has a lot of different, you're reinsuring, you're working as an underwriter. I think you're doing stuff with police dogs. You're doing all sorts of things like that. Growth was absolutely outstanding or just gigantic in the last quarter, and I was asked, is there becoming one category that's becoming predominantly bigger than others in that category? If so, what is it? If you can give us a little bit of a reminder of all the different things that are in the other revenue category, it would be helpful. The other revenue category is not direct to consumer. It's B2B. The goals of each of the small businesses that are in it are different. For example, we want the employees at a veterinary hospital to have Trupanion. We would love it if the employer paid for it on behalf of the employee. We think that is net good for our business. We don't need to make $1 from that. Our goal is to break even. The more successful that is, it reinforces our aggregate strategy. That has a unique goal. It's a B2B. There could be 100 pets enrolled under that, and then the employer decides, "I don't want to pay for it next year," and you can lose all 100. We have another section where we deal with the government on areas, and RFPs start off with one year and sometimes go to three years, and they could just disappear one day. What's most important, I think, about the section of the other revenue is strategically, it offers benefits to us, or at least we believe it does. That's why we're in it. It helps us scale our fixed expenses. It is beneficial in that way. It does produce a little bit of adjusted operating income for us, which we can then reinvest at a 35% internal rate of return. It's almost like a sandbox, but it's a sandbox that has B2B or other reasons. Everywhere across the board has been growing at similar levels. They're all doing very well, but they're off of smaller bases. The biggest area to it is where we're the company behind other brands. Yeah. Okay. That's the biggest one. That's been growing. Okay. Yeah. That is really helpful. I got this actually from an investor today. What kind of contribution should we expect from international over the next five years? Either in terms of a percent of revenue, maybe five years out, or percent of growth, however you want to help us figure that one out. We haven't given any of that guidance. Okay. Let me give you an example, though. We entered Australia about two years ago. Still today in Australia, we are still fine-tuning in less than 20 hospitals. One of the things that we are able to do at Trupanion today that I wasn't able to do 15 years ago is to wait until you get it right. We don't need any of these other initiatives to drive the growth rates that we expect over the next five years. Our core business can do that on its own. When we're looking at adding anything, we're going to be adding it for strategic reasons, and we're going to be adding it when we think it's ready to go into scale and do it the right way. We have guardrails. We will be always trying to target a 35% IRR, and we'll be happy anywhere between 30% and 40%. We'll be targeting the same margins. I don't think it's appropriate nor necessary that we set artificial dates or targets. I want to make sure that we do it right and we have the time to do it. To my outhouse comment before, we're not going to be spending so much money in this development that it's going to put the company at risk. The answer to that question is I'm not telling you. I'm not telling you because we don't know yet. I will tell you that all of the initiatives that we have in the 16-month plan, all of them we think if they'd went reasonably well, they could get to a $100 million run rate inside of five years. Any one of them needed to have at least that potential for us to be putting some resources and having teams focus on that. I might know who that board member is because a former board member did mention to me once that you guys need to be putting pedal to the metal a little bit more on the way you spend. Anyway, I'm going to go last long-term kind of viewpoint or question here. It's a little bit more theoretical. Is Trupanion in the right category in terms of regulated as property and casualty insurance? As there you see more and more growth in the category, do you think the regulators would ever maybe consider its own category or moving into healthcare? I just want to end with that long-term kind of theoretical question, and then I'll hop off. In North America, we expect it will get its own distinct line of business. It will likely still fall under property and casualty in general, but the category will be big enough that it will get its own set of defined rules. We've been working on that now for over seven years, and it's gaining traction. I can't tell you when in the next five years it will occur, but I'm pretty confident it will happen and it will benefit Trupanion. Got it. All right. Thank you so much for taking the questions. Thanks, Ed. Thank you for having this. Great. Well, it looks like we have time for just a handful more questions. If you have any questions, please raise your hand. Our next question will come from Eric Schleien. Eric, give me a second and I'll bring you over. Hi, Eric. Eric, you need to just go ahead and unmute your line. There you go. Your screen's off too if you want us to see you, Eric. Oh, I'm sorry. That's okay. My friend and partner, Eric, he invited me and I didn't know it was under his name. My name is Kira. Nice to meet you. Hi, Kira. My question is, with your exponential growth, how much of that do you attribute to that being the internal culture of your company? Also, what's your process in your five-year plan? With things not going to plan, with so many different things happening, what's your process in that? Go ahead and answer that. Trish, do you want to talk culture first? Yeah. I wasn't expecting you to ask me to talk about culture. I can if you would like. Overall, the culture of the company is very, as you can imagine, pet-focused, pet-centric. We are a company filled with very passionate people, and I think that helps us have a better chance of success compared to a company without a strong culture. The biggest thing that we want to be focused on is that as we grow, as we become a global company, that our culture remains as strong as ever. It's something that particularly the three of us are most focused on because we know that it's immensely important. Margi, you want to add anything? Culture? Yeah, I'm sorry. I'm being distracted by the beautiful screen. Yeah, no, culture, it's challenging when you're growing as quickly to make sure that you can maintain it and keep your finger on the pulse. Like Trish said, we're really invested in it. Not just us, but throughout the company. In COVID, it's been challenging to continue to communicate as effectively as we would if we were in the building. What we've done really well is created a real ecosystem where people can kind of continue to talk and have open conversations. That transparency is really key to all of our culture. It comes back to that trust and maintaining that through everything we do. As we build new products, as we add new things, we've been very good so far at saying you can try and if it fails, it's okay. We don't expect, as we've said in our 16-month plan, everything to work. We've gone into that with the business. We brought the business along as we were building the plan out. A huge number of the team helped us put that together as a plan. They're bought into that. They're owners in that plan. Everyone in the company is an owner of the company. They have stock in the company, so they're very vested in making sure that their role is very clear, the value they create and add is very clear, and how they can help one another. I think simple things like the daily goals report that we share with every single member of our team every single day, the first thing they'll have in their inbox is an update on how we're doing with all those key initiatives. We've made no secret of the fact that we think some will be brilliant, we hope, and some may not be as good, and that's okay. Because we're doing things that are always in keeping with our mission, I think it helps to kind of gel our culture together, and I think that's something that we've worked very hard and will continue to work very hard at maintaining. I'll use two words to sum it up, data and heart. We try to mix the two, and if an individual can be confident to be themselves, and we have an environment that allows that, we can measure things with our data, and we can lead with our mission and our heart. We can do extraordinary things. That's how we think about it. We've got written on the walls, "Be yourself, everyone else is taken." We're all here because our love of pets, and ultimately why we all love pets is because they love us for who we are as humans. It doesn't matter if we have a disability, it doesn't matter what size we are, if we're tall or if we're short, it doesn't matter our skin color or religion or our thoughts. Our pets universally love us, and when we create a culture that allows people to be their authentic self, and we measure the effect that they're able to do on the company with the data, and we can do that in monthly subscription, and you can live in a company where we believe we're really helping the lives of pets and pet owners, you got that heart, and you mix it together, and it's a Trupanion culture. Okay. Thank you very much, and it's been great being on and hearing about your company. Thank you. Thank you. Thank you. All right. That brings us to time, and that feels like a great place to end. We also want to make sure we provide everyone time to hop over to the Berkshire Hathaway annual shareholder meeting. I think we'll wrap here, but before we do so, I want to just ask Darryl or Margi or Trish if you have any final comments. Yeah. Thanks for attending. Thanks for making this another good event, and enjoy the Warren and Charlie show. It should be great. Thank you. Thank you, everyone. Bye. Bye.