Good day, everyone, and welcome to the Trupanion fourth quarter 2023 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please note that today's event is being recorded. At this time, I'd like to turn the floor over to Laura Bainbridge, SVP of Corporate Communications. Ma'am, please go ahead. Good afternoon and welcome to Trupanion's fourth quarter and full year 2023 financial results conference call. Participating on today's call are Darryl Rawlings, Chief Executive Officer; Margi Tooth, President; and Fawwad Qureshi, Chief Financial Officer. For ease of reference, we've included a slide presentation to accompany today's discussion, which is broadcast on today's webcast. A copy of the slides will also be made available on our investor relations website under our quarterly earnings tab. As reported in today's earnings release, the audit of our financial statements for fiscal year 2023 is in progress. We have identified two material weaknesses in connection with that audit. As a result, the numbers reported today are preliminary. We continue to work with our auditors to complete the audit, which may affect our ability to timely file our Form 10-K as we finalize our financial statements and disclosures and allow the company's independent registered public accounting firm to complete its procedures related thereto. I would also like to remind everyone that during today's conference call, we will make certain forward-looking statements regarding the future operations, opportunities, and financial performance of Trupanion within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed. A detailed discussion of these and other risks and uncertainties are included in our earnings release, which can be found on our investor relations website as well as the company's most recent reports on Forms 10-K and 8-K filed with the Securities and Exchange Commission. Today's presentation contains references to non-GAAP financial measures that management uses to evaluate the company's performance, including without limitation variable expenses, fixed expenses, Adjusted Operating Income, acquisition costs, Internal Rate of Return, Adjusted EBITDA, and Free Cash Flow. When we use the term Adjusted Operating Income or margin, it is intended to refer to our non-GAAP operating income or margin before new pet acquisition and development expenses. Unless otherwise noted, margins and expenses will be presented on a non-GAAP basis, which excludes stock-based compensation expense and depreciation expense. These non-GAAP measures are an addition to and not a substitute for measures of financial performance prepared in accordance with the U.S. GAAP. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release or on Trupanion's investor relations website under the quarterly earnings tab. Lastly, I would like to remind everyone that today's conference call is also available via webcast on Trupanion's investor relations website. A replay will also be available on the site. With that, I'll hand it over to Darryl. Thanks, Laura. Good afternoon. Across our key financial metrics, Trupanion made strong sequential progress in the fourth quarter. We delivered significant margin expansion in our subscription business. Since Q1, our adjusted operating margin has expanded approximately 540 basis points. Quarterly capital allocation was highly efficient, and we generated another quarter of positive free cash flow. I'm pleased with this improving trend in our results, but they don't tell the whole story. Entering the year, we faced unprecedented levels of veterinary inflation. We experienced margin compression in our subscription business, the first period of sustained compression since going public in 2014. We also made the necessary decision to transition to a more decentralized operating structure, which will better set us up to grow and be nimble in the years ahead. The team navigated well through this period of adversity. We took meaningful and deliberate actions to reduce expenses. We're operating with increased efficiency and discipline across the organization. I've also been impressed by the innovation and evolution of our tools the team is leveraging to drive our performance. I expect that we will carry our learnings forward with increasing levels of discipline and rigor. On that note, I also want to acknowledge the two Material Weaknesses reported today. We're committed to remediating and to doing better in the future. In 2024, we will look to grow our Adjusted Operating Income by greater than 30%. As our margins expand, the team will be more aggressive in growing, deploying the majority of these pre-tax funds at our high rates of return in our large underpenetrated global markets in which only 3% of pets have pet medical insurance. We intend to do so while remaining Free Cash Flow positive on an annual basis. Delivering on this plan will translate into strong value creation for our shareholders. We've done so for shareholders every year, but this past one. While I'm disappointed with the year-over-year results of our adjusted operating income per share in 2023, I'm proud of the team. The inherent challenges of the post-COVID veterinary inflation environment have made us a stronger and more capable team, setting us up well-headed into 2024 and beyond. With that, I'll hand it over to Margi. Thanks, Darryl. Good afternoon, everyone. I'm pleased to share that our results in the fourth quarter show continued momentum across multiple areas of the business. Our performance speaks to our ongoing focus on disciplined growth, margin expansion, and operating with increased efficiency across the business. In the quarter, total revenue grew 20% to $296 million. Subscription revenue increased 21% year-over-year, benefiting from a 14% PET growth and a 6% increase in average revenue per PET. Growth in ARPU for our core Trupanion product, which makes up 98% of our subscription business, was even higher, increasing 7.5% year-over-year as our ARPU rate flow continues to show more meaningfully. Retention for this book of business was 70 months on a trailing 12-month basis in line with our expectations. While we continue to closely monitor our retention rates across our three key retention cohorts of first-year, under-20% rate increase, and over-20% rate increase, we are paying particular attention to this latter bucket as a larger-than-normal portion of our members are seeing a pricing adjustment in excess of 20%. Over the last 12 months, approximately 298,000 members have had this experience, and through year-end, we had retained over 98.28% of them on a monthly basis. We now have an average of 26% pricing rolling through our book, and while still early in the year, inflation remains in line with our expectations at 15%. Against this backdrop, we are continuing to invest in our member retention efforts both operationally and through direct member outreach, increasing member education around our value proposition and the increased need for Trupanion as the cost of care rises. We have also identified opportunities to improve execution around our member experience. This relates predominantly to the use of our new policy administration system, which we expect will take some time for team members to learn. Meanwhile, while we ramp up the system, we're seeing lower-than-expected service levels. With our migration nearing completion, we look forward to leveraging our latest technology platform to deliver an exceptional member experience and ultimately enhance our claims automation rates, a key differentiator as a low-cost operator. Ultimately, the investments we have made are intended to help scale our business globally with greater levels of control and oversight, both from a member perspective as well as operationally. Adjusted operating margin for our subscription business was 13% in the quarter. While not yet at our target, I am pleased with a strong quarter-over-quarter expansion. This is a reflection of deliberate and meaningful actions to price our Value Proposition, drive efficiencies, and reduce any and all costs a member would not thank us for. This will be an ongoing focus in 2024. In total, we generated over $27 million in Adjusted Operating Income, which marks a new quarterly record. Of this, we deployed approximately $15.5 million to acquire nearly 67,000 PETs. This represents the same level of PET additions year over year, but with 23% less spend. As margins continue to expand year over year, we expect to grow our allowable per PET acquisition costs in line with our guardrails. While we're pleased to deliver growth efficiently, it is not our plan to throttle down growth so significantly over the long term. Once again, our veterinary channel drove the majority of our growth for our core Trupanion product. Since early 2022, we have experienced an unprecedented inflationary environment, during which time the need for Trupanion has never been greater. As a direct result of this, we continue to see strong leads, conversion, and retention rates from our heartland, the veterinary channel. In the quarter, we spent just over $13.7 million to add approximately 54,200 new pets, at an average new pet ARPU of $67.61. We estimate the average lifetime value of these pets at $615, and at an average cost to acquire of $233, the estimated internal rate of return of these pets was 42%, above our guardrails of 30%-40%. We also continue to see steady growth from our new products, channels, and geographies, which collectively represented approximately 19% of our gross pet adds in the quarter. Within our newer North American products, which include Furkin, PHI Direct, and our powered-by offerings for Chewy and Aflac, we added approximately 9,000 new pets at a new pet ARPU of $38.06. As noted, overall, these products have lower coverage, which ultimately leads to lower retention and therefore lower lifetime value. Given their early stages of development, investment in growth for these products continues to be minimal. In the quarter, we spent just $1.1 million to acquire these pets, which is just 7% of our total acquisition spend and equating to an average pet acquisition cost of $119. Because these products are not yet at operating scale, the estimated lifetime value and internal rate of return for these pets was negative. Achieving 15% adjusted operating margins for these newer offerings will be a primary focus for us before we look to increase our level of acquisition investment here. Moving away from our North American coverage, in Europe, we invested just $800,000 to add approximately 3,400 new pets in the quarter. Keep in mind that today, these products are not yet fully underwritten by Trupanion, and thus the revenue is not yet fully realized. International expansion is a key part of our 60-month plan, and over the last three years, we've more than doubled our addressable market to over 50,000 veterinary hospitals. Our margin expansion, coupled with lower acquisition spend, helped generate over $13 million in free cash flow in the quarter. On an annualized basis, we continue to target 2.5% of revenue, which we believe is a prudent amount given the strength of our capital position and our desire to grow in such a large underpenetrated global market. As I look back over the last 12 months, I want to take a moment to recognize and thank the team for their efforts and commitment to Trupanion and to the vets and pet parents who choose us to support them. This team includes over 1,300 pet-passionate individuals from across the globe, including our territory partners who serve as our frontline resource to veterinarians and their team. Collectively, we've grown our business to over $1 billion in revenue. We generated $83.5 million in discretionary income and added over 286,000 new pets. We developed and continue to evolve a more decentralized operating structure and moved key aspects of the business forward at pace. Most importantly, we continue to advance our mission to help the pets we all love receive the very best veterinary care. On that note, I'm proud to share that we're rapidly approaching an exciting milestone that serves as a testament to our mission. In a matter of days, we should cross over the threshold of 1 million subscription pets. That's a lot of lives helped and so many lives saved. This is why we do what we do. With that, I'll turn it over to Fawwad. Thanks, Margi, and good afternoon, everyone. Having passed my first 100 days with Trupanion, I'm pleased to say that it's been a great experience working with the team. As I'm learning more about the business, I remain excited about the significant opportunities ahead. Today, I will share additional details around our fourth-quarter performance as well as provide our outlook for the first quarter and full year 2024. Total revenue for the quarter was $295.9 million, up 20% year-over-year. Within our subscription business, revenue was $191.5 million, up 21% year-over-year. Total subscription PETs increased 14% year-over-year to over 991,000 PETs as of December 31, 2023. This includes approximately 40,000 PETs in Europe, which are currently underwritten by third-party underwriters. Total monthly average revenue per PET for the quarter was $67.07, up 6.3% over the prior year period. As a reminder, this is inclusive of all North American subscription products and will reflect a mix of business. Subscription business cost of paying veterinary invoices was $139.3 million, resulting in a value proposition of 72.7%, a 321 basis point sequential improvement towards our target over the prior quarter. As a percentage of subscription revenue, variable expenses were 9.6%, relatively consistent year-over-year and sequentially. Fixed expenses, as a percentage of revenue, were 4.7%, up from 4.1% in the prior year period, primarily due to investments in G&A. After the cost of paying veterinary invoices, variable expenses, and fixed expenses, we calculate our adjusted operating income. Our subscription business delivered adjusted operating income of $24.9 million, or 13% of subscription revenue. This is up from 10.1% in the prior quarter, or approximately 340 basis points of sequential margin expansion. Now I'll turn to our other business segment, which is comprised of revenue from other products and services that generally have a B2B component and a different margin profile than our subscription business. Our other business revenue was $104.3 million for the quarter, an increase of 19% year-over-year. Adjusted Operating Income for this segment was $2.6 million. In total, adjusted operating income was $27.5 million in Q4, ahead of expectations. This was up 15% from Q3 and up 11% from the prior year period. Our higher-value subscription business comprised approximately 90% of our adjusted operating income in the quarter. We expect this to increase as a percentage of total revenue as one of our partners in our other book of business, Pets Best, continues to roll off. This provides us the opportunity to move our investment dollars from lower value to higher value opportunities in our subscription business. During the quarter, we deployed $15.5 million to acquire approximately 67,000 new subscription PETs. Excluding the approximate 3,400 European PETs, this translated into an average PET acquisition cost of $217 per PET in the quarter. This compares to $283 in the prior year period and $212 in Q3. We also invested $1.7 million in the quarter in development costs. Stock-based compensation expense was $6.6 million during the quarter. As a result, net loss was $2.2 million, or a loss of $0.05 per basic and diluted share, compared to a loss of $9.3 million, or a loss of $0.23 per basic and diluted share in the prior year period. In terms of cash flow, operating cash flow was $17.5 million in the quarter, compared to $1 million in the prior year period. Capital expenditures totaled $4 million. As a result, Free Cash Flow was a positive $13.5 million and approximate $18 million improvement from the prior year's fourth quarter. Keep in mind that, historically, we have seen seasonal fluctuations in Free Cash Flow. With veterinarians typically implementing new rates at the beginning of the year, we see lower Free Cash Flow in the first quarter. In higher inflationary environments, as we are currently experiencing, this effect will be more pronounced. It is for this reason we have set an annual Free Cash Flow target. Turning to the balance sheet, we ended the quarter with $277.2 million in cash and short-term investments. Outside of our insurance entities, we held $46.6 million in cash and short-term investments, with an additional $15 million available under our credit facility. At the end of the quarter, we maintained $241.3 million of capital surplus at our insurance subsidiaries, which was $64.1 million more than the estimated risk-based capital requirement of $177.2 million. During the quarter, we took additional steps to improve the strength of our cash held outside of our insurance entities, including an ordinary dividend from APIC and shifting our building ownership. We intend to continue to make strategic use of our assets moving forward. One final point: As was noted in today's press release related to the 2023 annual audit, we expect to report in our Form 10-K two material weaknesses in internal controls. The first material weakness relates to information technology controls, primarily in the areas of user access and program change management over certain information technology systems. The second material weakness relates to internal controls over financial reporting pertaining to our other business segment. The 2023 audit remains open, and we are working with our auditors to complete the process. As a result, financial statements for the full year 2023 are preliminary and subject to the completion of the audit. Efforts to remediate these material weaknesses are underway. Now I'll turn to our outlook. For the full year of 2024, we are planning to grow revenue in the range of $1.241 billion-$1.273 billion. This is approximately 13% growth at the midpoint. We are planning to grow subscription revenue in the range of $842 million-$862 million, representing 20% year-over-year growth at the midpoint. We expect total adjusted operating income to be in the range of $100 million-$120 million, or 32% year-over-year growth at the midpoint. As we think about the shape of the year, our expectation is that, similar to prior years, we will start the year from a lower margin standpoint within our subscription business and build back to a 15% adjusted operating margin by Q4 of this year. We will continue to be disciplined in our allocation of capital, and as our margins expand more meaningfully in the second half of the year, we will look to be more aggressive in acquiring pets within our higher-value subscription business while operating within our IRR and free cash flow guardrails. With that as context, I'll move to our Q1 outlook. Total revenue is expected to be in the range of $297-$302 million. Subscription revenue is expected to be in the range of $198-$200 million. This is 21% year-over-year growth at the midpoint. Total adjusted operating income is expected to be in the range of $21 million-$23 million. This represents nearly 42% growth year-over-year at the midpoint. Keep in mind that our revenue projections are subject to conversion rate fluctuations, most notably between the U.S. and Canadian currencies. For our first quarter and full year guidance, we used a 74% conversion rate in our projections, which was the approximate rate at the end of January. We expect this will amount to a neutral year-over-year foreign exchange impact. Thank you for your time today. With that, I'll hand it back over to Darryl. Thanks, Fawwad. In a few weeks, we'll be releasing my 2023 shareholder letter. These letters serve as a resource to gain deeper insights into our company, highlighting both our accomplishments as well as our hurdles faced over the past year. For those interested in learning more about Trupanion and how we think and act, I encourage you to read it. I'll also point out that we recently announced the date of our annual Investor Day to be held September 18 here in Seattle. This marks a decoupling from our annual shareholder meeting to be held in June. The intent behind the change is to facilitate greater in-person attendance and participation. We hope to see you there. With that, we'll open it up for questions. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. To join the question queue, please press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question today comes from Maria Rips from Canaccord Genuity. Please go ahead with your question. Great. Thanks for taking my questions. I wanted to ask about your PAC acquisition cost, which was down more than 20% for three consecutive quarters, sort of understanding that some of that is mix shift. But, kind of more broadly, sort of now as you're gradually moving towards your target loss ratio, can you maybe expand on your thoughts on potentially becoming more aggressive on PAC, especially in some of your more profitable markets? Yeah. Hi. Thank you for your question, This is Fawwad. Yeah, so a couple of thoughts on that. PAC is something that, from a 2023 perspective, the company reduced, just given the environment, the inflationary environment. So we've tried to be very thoughtful as we think about 2024 and the shape of the investment in PAC. We would love to invest more, of course, where we feel like the returns are within our guardrails. We're trying to be very prudent and ensure that we see more of that margin expansion happen. So, I would say, in the first half of the year, we're a little bit more cautious until we see the realization of that. And then, as we get into the second half of the year, we feel more comfortable margins will expand, as they've been continually expanding through the course of 2023. That's where we feel like we have an opportunity to do more and be more aggressive. Got it. That's very helpful. And then, secondly, is there any additional color you maybe can share about your recent refiling with California? And so, can you maybe put sort of the 50%+ requested increase in the context of that sort of delta between requested and approved increase from back in June, especially given that sort of vet care inflation has similarly stabilized since then? Yeah. Hi, Maria Ripps. Thanks for the question. So, as we think about California, this is, again, sort of a typical cadence for us for rate increases as the cost of care rises over time. The rate approval in August was one that we got to allow us to continue to grow and meet our value proposition for a broader proportion of the population in California. As you mentioned, it wasn't all the way there. Since that time, cost of care continued to rise through that year. And so, this rate increase rectifies the gap that we have between our target value proposition and where we're currently trending. We're working with them to bring us to our value proposition and, over time, expect to get there. I would just also kind of draw attention to the fact that our biggest competitor in the state of California had a rate approval of over 70%. So, this is not atypical in this market that generally has higher access to care. And for us, this new rate request puts us to an average of a 13% increase over the past five years every year. So, 13% in California is effectively what we're seeing in our cost of goods, and that's what's reflected in our latest filing. Got it. Thank you so much for the call, and congrats on crossing $1 billion in your revenue. Thank you. Our next question comes from Shweta Khajuria from Evercore ISI. Please go ahead with your question. Hey, thanks. This is Jian for Shweta. So, first, just to kind of follow up on the rate increase question. Understand that this is an ongoing process, but what type of kind of expectations is baked into your full-year guide? Like, how much of the price increase do you expect to flow through the books this year? And then I have a follow-up. Yeah. So, currently, we have 26% flowing through our book in terms of pricing increases for our members. Currently, as we think about ARPU, our model is broken out by business units. So, as we showed earlier, we've got different mix of different products as we have new products coming into play. So, the pricing does manifest itself in ARPU. So, as we think about that expanding sequentially every quarter, as you get more of the book of business receiving that higher rate increase, as I mentioned earlier, we have close to 300,000 members now receiving a 20% increase. Now, we've got 26% flowing through. On average, more of our top line is going to be driven in ARPU versus PEC count at this point in time as we look to get back on track from a margin perspective, which is demonstrating the benefit of inflation on a book of business. And, overall, we'd expect to see that shape of the year start to turn in terms of ARPU to 26% by the end of the year, assuming that inflation continues to be consistent at the 15% mark. Got it. Thanks. And then the second question, apologies if you addressed this before, but for the Aflac partnership, can you talk more about just the pivot out of Japan and focusing on the U.S.? Why is that? And also, does that change your view of potential other market expansion, the timeline of that, or the scope of that? Thanks. Yeah. Yeah, sure. This is a great question. So, Japan was one of the many countries that we were looking at at the start of our 60-month plan. It's something that we were looking to do in conjunction with Aflac, our partner. And we were exploring it for a number of years, as we do with any markets we go into. So, really understanding the territory, understanding the operations, understanding the cost, and also that immediate opportunity. After the research that we conducted in tandem with Aflac, we realized it's not an appropriate time for us at the moment. It still absolutely is an opportunity in the future. And we mutually decided to redeploy our resources into other areas. It doesn't impact our decisions across Europe. The European progress is going really well. Happy to see that we've now expanded our total addressable market now to 50,000 active hospitals when you include Europe, which is a great opportunity for us. We feel like we've got a lot of room to grow in the space that we're in today. Overall, happy with that decision and still continue to be exceptionally aligned with Aflac. Thanks, Adam. Our next question comes from Josh Shanker from Bank of America. Please go ahead with your question. Hi there. I know it might be limited in exact weaknesses, but can you talk about these material weaknesses a little bit more? When were they noted? Do they impact prior-year numbers? What was the genesis of this all coming together? Yeah. Hi, it's Fawwad. Thanks for your question. I think I speak for all of us as a leadership team, that we take a finding of Material Weakness very seriously. As we mentioned earlier, the audit is still open. Right now, we're focused on putting the remediation in place for these two Material Weaknesses, and that is a top priority for the company. We're also planning to further invest in controls and in compliance to ensure we meet our own internal standards of robustness. As the company grows, we expect to continue to scale our processes, scale our systems to ensure we're operating to the highest standards. Just to add. Yeah. Yeah. As of today, we're not aware of any issues related to financial results as a result of this. Were the weaknesses you discovered already present in the company in prior periods, or did they emerge in this past year? Josh, this is Darryl. As the company crossed the billion-dollar mark, we've been increasing our scope and scrutiny across the company. So, this was all areas of increased scope. Okay. Okay. And then I noted that you mentioned among the high-price increase cohort, a 98.28 monthly persistency. That's down a bit from 98.6, I think, in 2022. Is there sort of a bottoming out, or do you think that it could go lower from here? No. I think, overall, 98.28%. This is something that we obsess with at Trupanion. It's a little bit lower than it has been. We've now got 300,000 of our members and counting that have gone through this bucket. It is a significantly shift, a higher shift than we'd typically expect, as you know. We don't typically have over 20% increases flowing through our book of business. I think we've seen some decent results so far. We feel good about the fact that we have more of our book pricing to the value proposition. And because we hold ourselves to a high standard, I expect that we'll be able to improve on the 98.28. But overall, we feel good about where we are, and we'll continue to focus on this as we have an increasing number of PETs going through there. Certainly, don't think it's a symptom of anything else other than we've got a high number of people going through that rate increase. Okay. Thank you very much for the answers. Our next question comes from Ryan Tunis from Autonomous Research. Please go ahead with your question. Hey, thanks. Good evening. Good afternoon there, I guess. I guess I'm just kind of looking for a qualitative discussion of where do you view the subscription PET book in terms of rate adequacy today relative to the start of the year? I mean, should we be thinking about kind of broadly I think you mentioned 15% loss trend. Is it going to be a similar year in terms of the rate activity you take in 2024? Is that what you're thinking? Or I guess, are there places is the rate need less today? Yeah. So, so far this year, we've seen the veterinary inflation coming in in line with our expectations of 15%. We have 26% rate flowing through our book of business. Those two things combined mean that we are nicely on track at this point to get to our target adjusted operating margin of 15%, our annual margin of 15%, by the end of the year. I think as we look at those vet costs, we'll continue to monitor them closely, and we'll continue to refine our pricing to ensure as many of our members as possible are hitting that target. The more that we can get the rate across all of our cohorts, the more we can grow and expand. But as Fawwad mentioned beforehand, we will prioritize our margin growth before we start to invest into pet acquisition. By and large, I think that 15% inflation seems to be consistent with last year. Now that we have some good adequate rate flowing through, we feel good about the trajectory for the year ahead. Does that answer your question? We'll move on to the next question. The next question comes from Jon Block from Stifel. Please go ahead with your question. Thanks, guys. Good evening. Maybe just to start on the 2024 adjusted operating income, the $100 million-$120 million guidance, it just seems wildly wide. The growth is, I think, like 20%-42%, 43% year-over-year. So, Fawwad, maybe you can talk about what takes you to the low end or the high end. And what I'm struggling with is it seems like, per Margi's recent comments, you're confident in the 15% adjusted OI by the end of the year, but that would seem to land you towards the high end. So maybe if you could just walk through that and reconcile it. Again, what are the dynamics that takes you to $100 million? What are the dynamics that takes you to $120 million? You seem confident in the 15%. Does that land you at $110 million? Does that land you at $120 million? Maybe you could walk through those moving parts. Yeah. Thanks for your question. So I'd say a couple of things. I think the things that inform our guidance, because of our subscription business, the majority of our revenue is repeatable. And then, obviously, we have a huge under-penetrated market, so we expect revenue growth. I think one of the things we paid attention to then is whether that revenue growth is accelerating or decelerating. And if I look just at our subscription business, if you compare Q3 2022, that showed a 19.9% year-over-year increase. If you compare it to Q3 2023, that then went to 20%. And then you can do a similar analysis comparing Q4 2022, which was 18.2%, to Q4 2023, which was 20.8%. If you look at our guidance for Q1, that gave us some confidence that the acceleration of revenue growth rate would continue. So that, combined with the sequential improvement in margin, gives us a high degree of, I would say, some high degree of certainty that we can achieve those numbers by year-end. There is also going to be a seasonal aspect to our forecast. So in any year, you would see lower free cash flows, for instance, in the first half of the year. As vets put rates through, there's also a higher frequency. In a normal year where you have 5%-6% inflation, you'd see that dynamic. Obviously, we're dealing with an environment that is significantly higher inflation. So rather than have, say, a 1-2-point impact in terms of margin, you're looking more at a 3-6. So it's more of a down in Q1 and then making sequential progress as we go through the year. That's the thinking behind the guidance. I think the other thing I'd add to that, Jon, is just as we consider the vet inflation, to touch on that point, if it's 15%, if it goes to 18%, obviously, as we've seen, that can have a very material impact on the margins. At this point, we feel good about where things are trending. That just hopefully gives you a bit of context to that width of the guidance. Okay. That was helpful. I guess I can also follow up with the offline. Then maybe just to pivot, and maybe I'll try to jam two questions in here. But in the past, you've talked about inflation increasing the demand for pet insurance, but I believe your 4Q23 gross ads were down again year-over-year. And that's also with the quality of gross ads declining as well. And that's in a market that's 5% penetrated. So how are you doing from a share perspective? Maybe you could talk about that as you've slowed the dollars to deploy. And then separately, I'm just having a hard time reconciling. It seems like total subscribers were up 2,000 Q over Q, but subscription pets were up 22,000 Q over Q. So other pets were down roughly 20,000 Q over Q, yet other revenues were up sequentially. Is that just an RPO thing that went through the roof with other, or maybe you could walk through that as well? Thanks for your time. Yeah. So I can take the first part of your question. So in terms of overall inflation increasing demand for pets, for us, as you know, we're always going to operate within our guardrails, and we've prioritized this year with margin compression really focusing on the amount of money that we have to spend to acquire those pets. What the team has done very diligently for the past six months is really pull back those levers on PAC spend and focus on areas where we can get that efficient growth. That naturally brings those IRR guardrails down with it because the lifetime value is reduced when the margin is reduced. And as you've all seen in the supplemental, we document out exactly what that impact is. And so that means that the allowable PAC dollars are reduced as well. So therefore, super efficient when our allowable dollars go down, our gross pet ads, they're still efficient. There's less money to spend, so those gross ads are toggled down. We fully expect as margins to expand to start to spend the second half of the year. We're expecting to see sequential margin from Q1 to Q2. So we're expecting that inflation that we typically would see at the beginning of the year, as Fawwad mentioned, will be accelerated by 15%. That's well over double what we'd normally see in inflation. So if you assume that margins for Q1, Q2 are going to be somewhat flat, then they start to pick up. That means our PAC spend picks up. So we feel good about that future state. We're seeing strong lead volume. We're seeing good conversion rate and retention rate through our core channel or veterinary channel. In terms of the overall market share, I think the market hasn't shifted significantly. We still have the veterinary channel as a stronghold, and we feel good about that. Then, Darryl, did you want to talk to the second part of the question, which I think you were asking about subscription pets and other pets? John, would you mind just repeating that part of your question again, please, just so we can make sure? Yeah, sure. So when I look at some of the data that you break out, I mean, it's hard to tell you what page it is. But your total pets were 1.714 million, up from 1.712. So your total pets are up 2,000 sequentially. Your subscription pets are up 22,000. So your other is down 20,000 sequentially to sort of reconcile the total. Yet your other revenue was up sequentially from 3Q to 4Q despite other pets being down 20,000 sequentially. So I'm sort of asking, how does that take place? Is it other RPO that comes up a lot? Because your other pets are back at a base where they were in 1Q, 2Q, yet the revenues for other is up notably from that period of time. And I'm trying to figure out what that is, if it's RPO, and if so, why. Yeah. I think it's a question we can follow up with you on, Jon. But I mean, the key factor to me that I would take away is when you look at the shape of the other business in terms of revenue throughout the year, you see the opposite of what you're seeing in subscription. So in subscription, we're seeing accelerating growth rates. In other businesses, you're seeing diminishing. But we can certainly follow up with you in terms of the lag between the change in pet count and then how that manifests in terms of landing revenue. Yeah. It's like a 30-year biz, right? I mean, it's pretty straightforward. Your other pets went from 742 to 723, 742,000 to 723,000 quarter-over-quarter. It's the first time that other pets were down, I don't know, in at least probably four years. The rebs were up sequentially. How is that possible? What happened to the RPO is what I'd love to hear. Thanks, guys. Thanks, John. We'll follow up. Our next question comes from John Barnidge from Piper Sandler. Please go ahead with your question. Good afternoon. Thank you very much for the opportunity. I believe you mentioned a shift in the quarter in the building ownership. Can you talk about that? Yeah. This is Fawwad. Thanks for the question. Yeah. So it's a couple of things. If you sort of look at the opportunities we have from creating operating cash that we can then deploy in the business, PAC as for instance, we did two things. And really, it was to try and take advantage of the over-capitalization of our insurance entities. So we took an ordinary dividend, which is basically accrued interest income. With higher interest rates, we now have the opportunity for that to be a more meaningful contribution based on our existing portfolio. And then from a building ownership perspective, the building is shared between our insurance entities and our MGA, our operating entities. So again, in consultation with regulators, we increase the insurance entity ownership so that then frees up cash that can be used for operating purposes by our MGA. We thought it was a prudent use of our assets. We think we can reinvest those dollars at higher rates of return to grow the business. I would just add to that, Jon, one of the reasons we bought the building in the first place was for this very purpose. So happy to be able to realize that activity and see it come to fruition. When that occurred, was there any change in valuation of the building? No. Our next question comes from Wilma Burdis from Raymond James. Please go ahead with your question. Hey. Good evening, guys. How do you view the need for scale? There's a lot of roll-ups going on in the pet insurance industry. Would you guys consider any acquisitions, combinations, anything like that? No. I mean, right now, I think we are very much focused on our core growth. We've got a number of different products and channels that we're looking to continue to grow and invest in. We have different priorities across those in terms of looking at continuing to operate within our guardrails, return to our overall target P&L margin profile, and looking at scaling there. I think we have made acquisitions in the past. I think it certainly has not been they were the first that we've done. We're not looking to do anymore. And I think we have some big moats that we've been building over years, and we'll continue with our own pet growth. Yeah. I'll just add that this veterinary inflation that we went through, we saw five consecutive quarters of margin compression. And now we've seen three quarters of margin expansion. We're prioritizing Free Cash Flow above growth. But as you can see, the team has been able to deploy at a 42% Internal Rate of Return. We can get very high rates of return on our internal pre-tax capital, and we have lots of opportunities. We really want to see our margins fully expand so that we can deploy greater sums of capital in our core channels at these high rates of return. So that's our overall strategy. Got it. Thank you. Maybe I missed this. Did you guys talk about how much capital you freed up via both the ordinary dividend and if there was any associated with the building, the movement with the building? Yeah. Hi. Thanks for that question. So there's a couple of elements to that. So when you look at our beginning balance, the $37.9 million, and then the Q4 balance of $46.6 million, there's the MGAs that we would normally get from our insurance entities. And as I said earlier, that's what we use for our operating expenses, whether it be claims, contact center, or fixed cost, etc., including PAC. And then the building and the dividend that we took was part of that walk from Q3 to Q4 that helped give us the $46.6 million. Okay. Thank you. Ladies and gentlemen, with that, we'll be concluding today's question and answer session as well as today's conference call. We thank you for joining today's presentation. You may now disconnect your lines.