Hopefully you all enjoyed that video. We wanted to start with a real reminder of why we're all here. Thank you so much for joining us today for our 2023 Annual Shareholder Meeting. We're thrilled to see so many of you here in person, and welcome to those of you who are joining us online. We have a great day planned for you, our shareholders, because this event is for our shareholders. Those of you who are familiar with our event know that we lean very heavily into Q&A, and today's meeting will be no different. We have leaders from throughout the business here to answer your questions in three different Q&A sessions. Unlike prior events, we're also adding a fourth session today, and that will include Darryl and Margi. Questions that are more appropriate for that session will be asked to be held until that time. So how do you ask questions? For folks who are here in the audience, just go ahead and raise your hand. Myself and a few members of my team will be running mics. Please, for the benefit of the online audience, do wait till you have a mic in hand. That ensures the people who are joining us online can hear your question. For folks who are joining us online, we did open up a Zoom webinar that will allow you to ask questions in a Q&A box. For information on how to find that, go to our IR website under Events, and you shall see the Zoom webinar information there. A couple more quick reminders: in between each Q&A session, we're going to be having some break time, and that just allows the in-person participants to get up, mingle, stretch your legs. For the benefit of the folks who are joining us online, we'll have a timer on the break slide. That'll give you a good sense of where we're at and when to make sure you're back for the next session. I believe that's it. If you have any questions, please do not hesitate to find me throughout the day and let me know. I'm going to hand it over next to our CEO, Founder, Chair of the Board, Darryl Rawlings, while he makes his short way up here. Please familiarize yourself with the forward-looking statement. Darryl? Thanks, Laura, and welcome, everybody. As the company becomes more of a global company, I'm thrilled to see people have flown in from Australia, from Europe, across the United States, Canada. So I'm looking forward to a kind of fun and informative day. For those that know me well, you know that I'm a fan of Berkshire Hathaway. I've been attending meetings for a long time. The idea is an open Q&A format so that you guys can learn about your company and what we're doing and how we're thinking about this for the long-term. Before we get started, I want to introduce our board. They're sitting here in the back. So we'll start with So with that, we'll hand it over to open Q&A. Bring the questions, and let's have a fun and informative time. Thank you. Not quite yet. You've got a few openings amongst us: me, Simon, and Stanley here. Hello, everybody. It's lovely to see your faces. Thank you for making time to come here and join us today. The team is excited to talk to you. They are all here, and they will introduce themselves in a short minute. Before we go into the Q&A session, I just want to give you a level set on kind of where we are, where we've been, to hopefully prompt you as well with some questions as you go through to really kind of help sow the seed. So as a reminder, you saw that beautiful video at the beginning. The reason that we are all here, the reason that we do what we do, is for our mission. You can see on the screen it's to help loving, responsible pet owners budget and care for their pets. There is no greater way for us to be able to show that in the invoices that we pay. For us, there is no greater need than having this ability to budget than today, as the cost of care continues to rise. Trupanion has found its real place in the market. This is a number that in December we paid $2 billion. $2 billion was something that took us nearly 23 years to get to. You will see the number here, and this is going to refresh through the day. The reason that we are here is we have now paid $2.2 billion in the space of six months. That's gone up that much. That's the testament to the mission that we are here for and the problem that we solve. We talk about invoices paid. Let's also have a look at this chart. This is one of the favorite charts that we have. We show it every year, and every year it gets bigger and longer, and those columns keep going up further to the right. What it shows is the sustainability of a monthly recurring revenue. It's very predictable revenue. What's also noticeable here is as that goes out, hopefully you might see the colors are elongating. As our retention rate continues to grow, so too do those colors, and so too does that sustainability. The little gold bit, which I think you may just about see at the top of the final bar, that's on the way up to $1 billion. By the end of the year, this will be a billion-dollar company, and you can see how far we've come. With that in mind, I just want to share a few stats related to the overall category. The Pet Insurance category, the category for pet care, as we look at this specifically, this is from NAPHIA data that was released earlier in the quarter. The industry has crossed the $3.5 billion mark for the first time. As a reminder, every percent of penetration is around $1 billion. You can see that finally we're seeing traction. People are appreciating the value of high-quality medical insurance. That is about a 24% growth year-over-year, 24%-26% growth for the category. Trupanion is leading the category growth with 29%. Our GWP for the year was $238 million, which puts us as number one. Now, I wouldn't normally be bringing this set up because this is not on a goalpost. This is not an achievement that we've been striving to get to. This isn't something that we as a team have been shooting for the number one spot. I'm bringing it up because it shows you that what we have been doing, slow and steady, very meticulous growth, specific in areas where we know we can add value, adding value to our members and our veterinary partners and our community, shows that it actually is proving that we're number one. And this is a stat that we do feel proud of. So I'm going to walk you through a few pointers here. And again, this is really where I'm getting into hopefully seeding some questions for all of you in the audience to ask of the team here. I just want to take you through our journey over the last five years to see kind of how far we've come. So on the screen in front of you and in front of me is the revenue. In terms of millions, I mentioned that by the end of 2023, we'll be a billion-dollar company. You can see that coming through, and if I put on the growth rate year-over-year, how that has continued to be in excess of 25%. Our 60-month plan, our goal is to average a 25% growth year-over-year. You can see in the first two years of our plan in 2021 and 2022, we're well exceeding that from a revenue perspective. So good growth rate towards a billion dollars. Our Adjusted Operating Income, you can see again on here the growth rate. You see the margin compression at the end of this chart. But what I do want to point out here is how that has grown. This is the dollar amount that we have to invest to acquire new pets. You can see every year how that's gone up. Throughout this period of time, we have gone in and out of cash flow positive. We've continued to grow the business. And for 2023, we will have close to the second highest Adjusted Operating Income the business has had, which means that we can continue to be growing the business and helping to build that revenue stream. And definitely, again, as we go through these, these are all set to hopefully plant some seeds in your mind of questions. The total subscription pets enrolled, a sneak peek here. April year- to-d ate, we're at 919,000. This is a fresh data point for you. You can see how that continues to grow. Over the last couple of years, we had 22% and 24% growth. So far, year-to-date, we're at 23%. The team can talk to you about where does that volume come from? We've just shown a slide for Adjusted Operating Income and how that's started to come down, yet our growth rate is still strong. This is an impressive number, and it's not because the teams are spending more money. They're really digging deep into the moats that we have today, and it's the problem that we're solving. So definitely dig into that when you speak to the team. Average monthly retention. This is something that we've always been proud of. This number is exceptionally strong. It is the strongest in the industry by double. If you look at this over the last few years, this is our monthly retention rate of our members. As we have got bigger, this retention rate has improved. We saw a slight dip down in 2022. I'm going to give you a bit of a cheat here. Please make sure that you ask Kelly or you speak to Kelly about what our retention rate looks like so far in Q2. I think you might like to hear that. And then efficient pet growth. So this is the Adjusted Operating Income when we think about how much money do we have to acquire to get pets. You can see how that's grown as our Adjusted Operating Income has grown over the years. We have our guardrails of Internal Rates of Return that every single GM operates within. And you can see again that margin compression hit in 2022. In Q1, that 289 fell to below 250. The team continued to add pets, and they added them efficiently, and they will continue to do so through the rest of this year in areas that we know we can be growing and we will not be growing in areas where we shouldn't be. So why did I take you through that? This is a consolidated view of the business. So this is everything Trupanion. So all of the people here in front of me today represent different areas of the business. So while we look at this in a consolidated way, we also break it down by P&L. I haven't got time. Otherwise, you'd be listening to me all day, and none of you want to do that. I haven't got time to take you through every single P&L, but we do have the P&L owners here, and I would encourage you to ask questions of them specifically. But what we're showing you on the slide here is the quarter. This is Q1 of 2023. And these are actual P&Ls that these folks behind me and in front of me represent. And you can see how very different they are. But what you can also see is we are measuring each of these P&Ls on the same basis. So we can see where should we grow, where should we not, where should we invest more, where should we look at targeting more in retention or looking at our acquisition costs. So all of these metrics are consistently reviewed. When we think about where the company is today and how we are looking at decentralizing things, we're doing it to ensure that we have this ability to be nimble, to really dig in and understand what we're doing because not everything is treated equally, and therefore we shouldn't be operating as though it is. Over the last 30 months, so halfway through our 60-month plan right now, I'm going to take you on a little bit of a journey of two halves here, first of all. We have added 50% active hospitals, 50% more. That is a huge number that took us a long time to get traction. We have well in excess of 16,500 active hospitals. They are hospitals introducing the concept of high-quality medical insurance to their clients every single day. And that's strengthened significantly in the last 18 months. This is our moat. This is what we've focused on, and this is how we can continue to grow as efficiently. 37% increase in vet leads. I know there are some GMs in the audience that will tell you that they are growing much, much faster than this in some places, so ask about that. On the other half of the table, another 3,500 hospitals have been added with our software to be able to be paid directly. We now have over 9,000 hospitals that have the ability for us to pay them directly, and a quarter of our members are being paid direct to vet in under five minutes. That number has gone up significantly, so we've seen an increase in active hospitals. We've seen an increase in the fact that we can pay direct to vet, and we've seen a greater need for Trupanion than ever before. In the middle here, what stands out about all this together is we have doubled our addressable market in 30 months. We had our North American market. We have 25,000 hospitals in the North American market that we have been working to partner with, and now we have added additional geographies and additional work streams that the teams here can speak to, and they're sitting here in front, so they will introduce themselves shortly. So to do that, all of this, it doesn't come for free. You have to invest to grow your business, and we have done both. We have grown our North American business, and we have invested to grow internationally and with new products and partners, so I'm just going to briefly touch on this, and we will be able to dive into some more detail. You are not expected to see this, just to be clear. This is not an eye test. This is a reference to page four, which I know you have all read, of the annual shareholder letter. And the reason I bring this up is in this table that shows you how much, among other things, what our Adjusted Operating Income is and how much we're spending to acquire a pet. And when we think about our cash flow and we think about where our cash flow is, we choose to invest that money to acquire a pet, but our cash outflow is all discretionary. It is PAC, it's CapEx, and it's development expense. We have levers that we can pull. And throughout this period of time, you will note on the bottom of this chart when you've looked at it, we have flown in and out of cash flow positive. Our goal by the end of 2023 is to be at cash flow positive again, and the teams are flexing levers to allow us to do that. As a question, I'm sure it will come up, but as a question for Wei, I'm just planting that seed. How can we do that? Again, pointers for you to ask the team questions about this. We're looking at our growth rate. We're looking at how do we prioritize growth in areas where we know we have high margin. We know we have the right prices in there. We can go in, and there's market to be taken. We look at that P&L, and the GMs look at the P&L that you saw very specifically. It's not just by market. It's by state. It's by territory. It's by neighborhood. They know where to go fishing. They will not tell you where they're going fishing, but they know where they're going, and they're doing it accurately, and they're doing it where we can uphold our value proposition, and there is sustainability there. And that will then, in turn, help cash flow generation. The discipline that we have there will then also be conveyed and is being carried over into the operations side of things. Jon and team can speak to that, how we're thinking specifically about our fixed and development expenses. Simon and his team have been busy building internationally. What does that look like for development and also from a CapEx point of view? And then we're going to focus on a member experience. Many of you will remember in 2020, when COVID hit, we really doubled down our pet acquisition spend. And we focused very specifically on helping the people who had chosen to be partnered with us. Our retention rates went up very high, and we are very proud of what happened during that period of time. The team is doubling down. We are increasing our focus, and Kelly can share more about that with how we're thinking about our discipline there. And then finally, we are, for the first time in our history, overcapitalized. Sometimes we have cash, and we have to put it into Risk-Based Capital as we continue to grow. That is not the case today. So cash that we are spending is on pet acquisition. And we are looking at how do you release some of the working capital that potentially we could take from RBC perspective. So without further ado, I want to just summarize a little bit of what you heard. We're in a market where we have excessive demand for our product. The cost of goods has gone up faster than we have ever seen in the history of Trupanion. We are paying more vets directly than ever before. We have more active hospitals. We have more people raising their hand wanting our software. We have higher retention rates, high conversion rates, high lead volume, and we've just doubled our addressable market. So without any more said, I want to introduce team, and they're going to sneak around. We haven't practiced this, but I'm going to kick off with Tom at the back there. Tom, can you introduce yourself, say your purpose, and how long have you been with Trupanion? Of course. And good morning, everybody. So I'm Tom Vaughan. My team's responsible for our Brand Marketing, also for our conversion and Retention. I have been at Trupanion for one year, almost to the day, actually. It's also my wedding anniversary. So nine years today, let's share a sad thought for my poor wife. And yeah, that's me. I'm sure that's enough. Hey, good morning, everybody. I'm Brian Daily. I've been here 18 months. It's not my wedding anniversary, but I do lead Contact Center Operations, Phone Sales, Customer Care, and the Retention teams. Hi, my name's Jackie. I lead our claims team, and I have been here about one year longer than Tom's been married, so 10 years. Hi, Mikel Gray. I'm an Actuary. I work with a team that focuses on Trupanion pricing in North America. How long have you been here? Three years. I'm Jessica. I lead the Actuarial team, and I have been here for 10 years. Hi, I'm M.J. Hewitt. Oh, yeah, I forgot about that. Hi, I'm M.J. Hewitt. I oversee the growth and execute strategy across one of Trupanion's North American markets, and I've been with Trupanion for 13.5 years. I'm David Markham. I'm a Territory Partner, and I've been here for 13.5 years. I have a mic. Thank you. I'm Chris Cappelletti. I've been here since 2009, as I started as a contractor. I've had various technology roles over the years. Currently, I oversee our Technology Development teams that work on our hospital software, as well as oversee the developers that we acquired through our Aquarium acquisition. Hi, I'm Asher Bearman. I was previously Outside Counsel of the company, and I've been on board full-time for 10 years, and I lead the Corporate Development, Legal, Regulatory, and Compliance teams. I'm Brenna McGibney. I think I'm the baby on the panel because I've just been here 10 months, and I oversee our Administration functions at Trupanion. Good morning. I'm Simon Wheeler. I've been here twice as long as Brenna, so 20 months, and I'm responsible for Trupanion's growth outside North America. Hey there. I'm Steve Weinrauch. I'm a veterinarian. I've been with Trupanion for just under 10 years now. I look after all things veterinary and product and my why. I consider myself to be an Economic Euthanasia Assassin, and hopefully we can bring the team together to make that happen. I'm John Gallagher. I've been here for seven years, and I head up our Global Support Services. Hi, I'm Emily Dreyer. I've been here for 10 and a half years and I look after our North American growth outside of the vet channel. Morning. Wei Li. I'm an Interim CFO leading our Finance function. I've been here since December 2018, so 4.5 years. Suzanne. Hi, everyone. I'm Suzanne. I head up the Conversion Experience across the website and through our communications. I've been here a year. Hi, everyone. I'm Kelly Nealson. I head up our Customer Marketing team. I have been with Trupanion for three years now, and my team looks after member retention, life cycle, as well as our referral, friend, and iPad enrollment channels. Good morning. My name is Kevin McWhorter. I lead our Insurance R elationship and Partnership teams, specifically our State function. I've been with Trupanion now two years. Good morning, everyone. Kelly Watson. I've been here for a little over a year. I lead our Worksite Sales team for North America, specifically FI. Hello. I'm Bradley Lamb. I've been with Trupanion for four and a half years, and I lead our Chewy partnership. Good morning. I'm Malcolm Bates. I lead up the Diversity, Equity, and Inclusion for Trupanion. I've been here about eight months. Morning. I'm Dewald Oosthuizen. I lead our Learning and Development team. I've been here 20 months. Morning. I'm Jordon. I lead up our Data Analytics, Data Science, and Data Engineering teams, and I've been here eight years. Morning. My name's Aaron Konichek. I'm a Manager on the Actuarial team leading up North American pricing. I've been here three years. Hi, I'm Jessica Walder. I'm on the Legal team, and I lead our Regulatory and Compliance team, and I have been here for 3.5 years. Hi, Don Scott. I run IT Operations. I've been here for four years. Good to see everybody. Hello. I'm Alan Schomburg. I'm an Actuary here at Trupanion. I've been here for six years, and primary focus is our reserving category refinement and international pricing. Good morning. I'm Derek Cummins. I was the Co-Founder of Pet Expert and part of acquisition of Trupanion in November of last year, responsible for the Pet Expert business across Europe. Good morning. I'm Jan Moravec. I'm also part of Pet Expert, Co-Founder, and I'm responsible for the IT and, as a CTO, everything technical. Good morning, everybody. I'm Richard Enthoven, part of the International team and primarily Smart Paws and Development across Europe. Morning, everyone. I'm Nick White. I'm a Co-Founder with Richard Enthoven of Smart Paws. We're in Germany and Switzerland. I'm a Veterinarian, and I'm now our Clinical Director for Smart Paws. Steve Rose delivering the Trupanion experience in Australia. Five years. Good morning. Jason Wasden. I'm proud to say I've been with the company for 13-plus years. I'm one of the leaders of one of our North American markets. Good morning. My name is Travis Worra, like Jason. I lead up one of our North American markets, and I've been here for a little over four years now. Good morning, everyone. My name is Kalpesh Raval. I'm one of the GMs responsible to grow the North American market, and I've been here for two-plus years now. Good to see you all. Good morning, everyone. A.J. Percal, responsible for the Furkin Pet Insurance line of business, and I've been with Trupanion for about two years. Good morning, everybody. My name is Paul Piggott. I've been with Trupanion for four years, and I lead, excuse me, I lead our low-ARPU product in Canada called PHI Direct. Okay. So now you've met the team. Let's ask them some questions. Here are some tips. We have a hand raise. How are you? Hi, Shweta. [audio distortion]. Hi, I'm Shweta at Evercore ISI. Double questions, please. So the first one is, on one of the slides you showed, IRR was 30%, which has been trending down. So could you comment on, is it getting more difficult to get that incremental subscriber? And then I have a follow-up. What is the second quarter retention rate so far? And then following up on that, just one quick one was the AOI, the margin was also 14% on a different s lide. Could you comment on that and your confidence in how you're thinking about pricing and going forward? Thanks. Yeah. So I will kick off and hand off to the team just in terms of IRR. So trending down, yes. As we see the margin compressed, what we've been doing is dramatically reducing the PAC. So we talked about it going from kind of close to $300 to under $250 in Q1. That will continue as our margin compresses. So kind of as we think about that, we're always going to operate within our guardrails. I'll ask the team. It's getting harder for them to operate within that. Emily, do you want to start? Yeah, sure. So for our growth overall, obviously, when our margins are compressed, it does put some pressure on our PAC budget. So in previous years, you've seen us growing at 25%+. I would expect something a little bit different this year. But it does give us an opportunity to really hone our skills and continue to get better about how we're getting granular with our acquisition spend. So while it's definitely putting some pressure, the teams are able to really focus in on where we're growing, what numbers we need to hit in those specific areas, and again, really honing that skill that I think is going to continue to be really valuable as our PAC budgets start to open back up again. M.J., would you add? Is it harder? It's different. It's definitely harder in the areas where we're looking at, or to your point, we go fishing, and we go fishing in areas where we have that opportunity. And so I think where it's not harder is that our core business in the vet channel is on the backs of our territory partners and through our exam day offers and through the technology that we have. And we continue to have that. And so, progressing that and using the tools that we already have at a lower cost has been—we're continuing to grow in that lead space, so. Okay. Retention. Yes. Thanks, Margi, for teasing that Q2 retention number ahead of time. I think we do have a slide that shows quarter-over-quarter retention, but our Q2 retention to date, which includes April and May, is 98.73%, which is a number that we're really proud of considering. And you'll hear a bit more today about the larger rate increases that are flowing through the book, which are getting us back on track and giving us gains in ARPU. Obviously, that puts pressure on retention, and in Q2, we've really been outperforming what we had forecasted for retention. So we're proud of that result. What drove that? So specifically, we have been really focused on the renewal experience and have seen some strong gains there, as well as in first-year retention. So we look at retention by bucket: our members in their first year who've not received a rate notice yet, and then members who have received a rate notice, and we break that into under and over 20% rate change. So we've seen some gains across the board, but I think particularly we've seen strong performance in our over and under 20% rate change buckets, which has to do with the way that we are continuously iterating on communicating rate changes to members, which becomes more critical as they're receiving a higher rate change. And so we pride ourselves on being really transparent with our members about the drivers behind that rate change and helping them to understand that veterinary inflation is outpacing the inflation that we're seeing on average across the board that everybody is experiencing. And ultimately, leveraging our data, veterinary partnerships, voices of veterinary partners to help explain that to members, take them along that journey with us, and put their rate change into context and ultimately get the point across, help them understand that it's a good thing. Vets are charging fair prices, and an insured member is going to be able to afford that with the help of Trupanion, and that's ultimately a great thing for the pet, which is why we're all here. And then, of course, in times of inflation and times of uncertainty, it's that much more important for them to have coverage for the unexpected. So it's really our job to get that across to members, and I think we're seeing that in the numbers. And Wei? Yeah. I'd like to quickly clarify on this. I believe I'll go back to that slide. I believe the retention we show here is a single quarter retention, where, in our public filings, we report every quarter, is a trailing 12-month retention. Just want to make sure we're on the same page about that. And also in our IRR model, we're using trailing 12-month, not the single quarter. And I'll kick off on the third question about our margin, and I probably will let the pricing team chime in as well. So yes, the margin compression has started Q2 last year. So let's be honest, this is just hit by a one out of three decades inflationary environment for us and for many P&C insurance companies. Usually, our business model plus the cost-plus model, we have the cost, and then we apply the margin, 15%, right? And then usually, in the past 10 years or more, we have this average 5%-7% cost of invoices, and ARPU is the same, right, like this. And then coming out of COVID, especially the past nine to 12 months, this rapid rising inflation, I think, caught everything as a surprise, especially the past quarter in Q1, right? So the margin compression, which we are facing right now. So I think I can share that in the past two months, April and May in Q2, the data we have seen, there's no more surprise. It's pretty much in line with what we reported a month ago at the Q1 earnings call. I think I'll hand it over to maybe the pricing team, maybe chiming a little bit. Yeah, so about 10 months ago, we were able to, for the first time, recognize, measure, and report out the change in inflation. We had heard rumors. We had seen reports about increasing inflation. That's all information that feeds us and we react to. But until we can measure it and report it, we can't ask for rate increases from regulators. That process started 10 months ago. The lag in time between when we recognize and when we file and when we actually receive rate increases takes a little bit of time, so essentially, the trend has an inflection point in it. It goes steeper, and there's a period in time in which we need to catch up to that new trend level. We have been going through that process over 10 months. That created the margin compression. We are in full flight now. We are in the process of catching up. I will remind everybody that at the end of this period, there will be another inflection point. It will likely go down before it goes up again. It could go up again, and if it does, we'll chase it, but it will likely go down, and there will also be a lag, and we will be ahead for a while, so that is just the way our business operates. And just to sort of put a point on that one, to reiterate what the team has said, we're operating under the assumption of 15%. We've been operating under that assumption now for a few months. There's nothing that we're seeing in the data to suggest we should be changing the assumption right now. Thank you. Maria Ripps from Canaccord Genuity. I just have a sort of a bigger picture question. It feels like what we're seeing today in pet health insurance is similar to what happened in human health insurance some time ago, and that is as insurance is sort of gaining more adoption and is more fully utilized, that in itself is driving high inflation. Of course, in the near term, there are other sort of drivers here, but we'd love to hear your thoughts on this. That sounds like a great Mkel question. Well, I did work in human health for a few years, maybe closer to 40, but I try not to give that away too easily. To the extent that insurance increases utilization, I do think there is some evidence out there that that happens, but we are only pricing from our currently insured data. So those are already insured. So most of the phenomena that created this extra inflation has to do with what we've already reported on, which is increasing vet costs and potential increase in frequency due to people coming off COVID being able to increase their access to the vets. Dr. Steve? Thank you. You read my mind. We're in a 3%, sub-3% penetrated market. We're not even close to what's going on in the human space, and we'll all be dead and buried by the time something like that has the potential to happen. So I'm not concerned about that there. But look, the price of everything from hamburgers to fuels has gone up. It's got nothing to do with insurance. Josh Shanker from Bank of America. Back in April or May of 2021, Progressive noticed that the loss cost changes were happening in auto, and the company that hadn't grown, not grown any time in its history of public filings, stopped growing for a 12-month period. It never happened before. They repriced the business, and now it's growing faster than ever. In Q1 2023 results, GEICO lost 1.3,million, 1.4 million customers net as the company has closed itself up apparently to new business at this point in time. Insurance, the margins get worse, and then they get better. Is there any desire for Trupanion to slow its growth at a time when adding new customers and new pets is coming in at an IRR below the short-term level of profitability the company wants, only to turn the growth engine back on after the rate changes come through that give the company higher confidence? Is there anything that you learned from some other insurance companies that have done something similar to that? Yeah. So we're thinking about it exactly in that way. We know when we look at the granular level of the data that we have today in terms of our P&Ls, we know that within those P&Ls, there are pockets that we are priced perfectly well for, and we absolutely will grow in those spaces. There are also pockets that we are not, and we are aware of where they are. Working with the GMs and with Emily's teams and the TPs are really kind of understanding where do we go and where do we not. So we naturally have connections in the vet hospitals. We're talking to the vets about where they need to be focusing on puppies and kittens, making sure that we're really kind of targeting them with members. We are not growing at all costs. As Emily alluded, you will see that growth rate, the pet count, slow down as our Adjusted Operating Income comes down. We're still operating under the same guardrails. It takes a little bit of time to slow that growth down, but the intention of the team is to operate with real discipline and diligence, knowing that that's where our cash is as well. GMs, would any of you want to speak to that and add how you're thinking about your growth and kind of the way that you're helping to guide TPs and conversations around where they should be going and talking to hospitals? Yeah. So as it was alluded to, we are very focused as GMs and focusing in the areas that we see the best return. And I think Emily was mentioning earlier, it's not just on a state level. It's not just on a territory level. It goes all the way down to the hospital level where we talk about, "Hey, this hospital or this neighborhood that this hospital is in is perhaps a little bit underpriced and doesn't positively impact the rate of return that we see in that area." So not deprioritizing given areas or given neighborhoods, but really kind of focusing more on what are the neighborhoods that we're seeing really positive returns in. So we're really granularly focused right now into the neighborhoods that, again, we're seeing positive returns in. Thank you, Travis. And just to speak to that, what you see on the screen is, and it's really tiny. Apologies. It's how small this is. This is actually Q1 2023, full spectrum of the P&Ls that we have. So within here, you've got the North American P&Ls. You've also got the new partnerships and products. So you can see that as we look at this, we then break these down in a lot of granularity, really helping the GMs and the decision-makers of the business units understand where should we be growing. And to that point, Josh really kind of slowing down the pace that we would otherwise be accelerating in, and all with the intention of keeping everything very smooth so when the margin comes back up and when we see the pricing is right across the board, we will be accelerating more aggressively. I can also add a bit from the consolidated high level of the entire company's perspective. So we use the IRR model, and I believe it's not perfect, but that's, I think, an appropriate model for us to inform us how much we can spend, right? Josh, when you think about, "Okay, the margin is compressing right now The inflation's going up." So if you run this to the IRR model, which actually started this quarter, you can see the IRR is a little bit low. So that tells us how much we should spend on the pet acquisition. So we're very disciplined to stay in that guardrail to make sure when the margin compress, and then the money we can spend to grow will be lower. And then, yes, I think it will not be going to be a one-to-one, like a 1% less of pet, equalized to 1% lower growth, not that, but it will be a little bit slow. Our goal is to make sure the IRR is within that guardrail. And also, from my perspective, taking this role going forward, I think I'm going to stress a lot more on the Free Cash Flow positive. I think at the size, we're going to $1 billion at the end of the year. I think the Free Cash Flow needs to be positive, and we are actually expecting that. Exiting this year, we're expecting the Free Cash Flow to be positive if the inflation stays in line with our expectation. Let's go here. Hi. Good morning. Another question. This is Toby, Family Office from Atlanta. Another question for Wei Li. Can you maybe talk about your surplus capital you have today and how that might progress throughout the year? And then related to that, another potentially great IRR opportunity you have that you can actually turn off and on would be to buy back shares. So I don't know if there's room for that, but maybe you can talk about that as well. Okay. So Margi already touched that at the opening presentation. Our insurance companies, we are overcapitalized right now, especially with the slowing down of the other business. The Pets Best business will start to roll off from our book. Our ratio, the RBC ratio, I think many of you know there's a threshold, 210%. That's our minimum threshold. We agreed with the New York regulators for years, and they're happy with that. At the end of last year, I believe that ratio was 228% for American Pet Insurance Company. That's our major operating insurance company. We're expecting this ratio to be much higher by the end of this year. With the Pets Best start rolling off, we're still going to have a decent growth overall because our subscription business is still growing nicely. The growth rate actually is a pretty significant factor in calculating the RBC. It's all prescribed from the regulators, right? I think we're fairly confident to say we're never going to go back to 210 anytime soon. So that's my answer for the first question. And the second question is about IRR opportunities and any buyback. I'll talk about the buyback. Maybe somebody can chime in on the IRR. So let's be honest, the capital environment, capital is expensive. It's not like two or three years ago during COVID, 0% interest rate. Now it's like close to 5%. So we're monitoring our capital very closely. If there's good opportunities, why not? But I think from my perspective, I think the single most important responsibility for CFO is to preserve your capital. Make sure you deploy your capital efficiently, whether either to support your business and which business line to support, or maybe you buy back or you invest. So we are taking into consideration holistically about this, how to deploy the capital. Yeah. I'll hand it over to somebody else. I think you answered the question. We can also say Darryl and I are chatting at the end of the session. So maybe Laura, you can make a note of that, and we can pick back up on share buyback this afternoon. Let's go to John right there. Thank you very much. John Barnidge of Piper Sandler. Can you talk about your assumed speed of roll-off of the other business in your comments around surplus outlook? So I think by the end of 2023, the other business is to continue to grow. I think we gave our guidance for total revenue, which is going to surpass $1 billion this year. And also, we gave the subscription revenue guidance as well. So you can back out the other business. I believe it's still over 20%, something like 20% growth for this year. And then for 2024, we'll start to see, especially from the Pets Best, which is the biggest chunk of the other business segment, we'll start to step down in terms of the growth rate. But as we have reiterated many times, this is not necessarily a bad thing. I mean, top-line revenue slowing down because of the other business. But we always focus on our subscription business, for sure. And the other business, especially Pets Best, in the early days, gave us benefit in terms of help of scale and also gave us the data we need when we were small. Now, just the arrangement with the margin we get from underwriting Pets Best products, it just doesn't make sense anymore. So we entered into this new agreement, locked them for three years, and then we couldn't be happier about this arrangement. And so that's actually the primary reason I'm confident to say the previous question that I don't think our RBC ratio will go down to 210% anytime soon. I mean, we're going to be overcapitalized at our insurance company going forward. And we expect currently that that will be fully rolled off by the end of next year. We are still enrolling new business for Pets Best as we sit here today. So there is still a lot going through the books, but we expect it to be the end of next year to see that fully kind of roll off a new business. We're talking about Margi talking about new business. The existing book will have a long tail, at least three years locked according to the agreement. Yes, theoretically, they could overnight, they could go to some other underwriter, but that's not going to happen. [crosstalk] Yeah. For existing business, there's going to be a long tail staying with APIC as their underwriter. Thank you. Andrea from Italian Family Office. I had a follow-up question on reserves. Can you translate the sort of overcapitalization threshold in sort of absolute dollars that are sitting on the reserves and by how much we are overcapitalized now and maybe by the end of the year? And what is the idea there? Is the idea that the company will sort of grow into this overcapitalization and go back to its target, or will it even be a source of funds to be deployed, for example, in pet acquisition? And maybe last thing about the reserves, can you tell us something about how they are invested, if there is any sort of mark-to-market losses on these investments of the reserves? And with interest rates going up, if these reserves will be a source of a few millions in interest. Thank you. Okay. So I just want to make sure I understand the question. Will you talk about because internally, when we say reserves, we're talking about IBNR reserves. So you're more talking about the surplus? Surplus and yields. Surplus at the insurance entity. And you're asking about the absolute dollars, right? So I believe we file APIC quarterly, and I think the annual statements is there under the NAIC platform. If I remember correctly, it's about $160 million under APIC. So this will continue to grow, but it's a much slower pace, I would say. It depends on a lot of factors, actually. The growth rate is one. The loss ratio is one, so I cannot give an absolute dollar right now, but I can confidently say the percentage RBC ratio I mentioned is going to go up this year. And I think, just to add to that, when we think about how we're what's the idea and what will we do with that. We're in active discussions to work out, do we grow into it. That could be one option. If we grow into it, it means that we have the benefit of not having to invest further capital as we grow. Primarily, we'd like to be able to take that money and use it to acquire pets in the right places, and we are actively discussing that right now. So we have nothing definitive that we're sharing at this point, but knowing that we don't have to take more of that money and invest it for capitalization, which is the first time in our history we haven't had to do that, that gives us a long runway, a much longer runway than if we necessarily had it in our bank. So we're working through that process. It is a benefit to us. It's a potential future lever, and it's something that we'll continue to work with the New York DFS to work on what that solution looks like overall. Yeah. So within the APIC, we have an asset portfolio trying to basically capture the rising interest, get the yield at the market level. And then Margi just mentioned that we're overcapitalized, and also we're entitled to get the cash out of the insurance company. Some of the measures we have to get the New York approved. We have been having that conversation. Some of them actually are very discretionary. It's making its way over to you. Question about the IBNR and mark-to-market. Where's the money invested? Yeah. We have a portfolio. We started a fixed income portfolio, Q2 and Q3 and Q4 last year at APIC. And basically, out of that portfolio, we can capture the yield at the current market yield, if I recall correctly, 4.9%-ish. It's a super, super conservative way, all fixed income, all, I would say, NAIC level one or level two investment portfolio, and short duration. I believe it's one to five-year duration. We're not going to have any long-duration investment. As I mentioned, preserving the capital is the top priority. Yeah. So our philosophy of investment is very prudent. Hi, this is Katie Sakys from Autonomous Research. I just wanted to continue on the subject of overcapitalization and really the assessment there. I mean, digging through your 10-K, RBC was currently at $162 million at the end of 2022 versus a $142 million minimum requirement. That's only $20 million. So I'm just struggling to understand how that is considered overcapitalized when you've been having to draw down on a term loan to keep it there and Free Cash Flow has been negative. Sure. So that's as of 2022. We're seeing a significant more room in 2023, if that makes sense. Katie, do you have a follow-up? Sorry about that. Okay. I guess to follow up also on the retention slide you guys put up earlier, awesome to see that retention has improved a little bit this quarter \to- date. But I'm curious what percentage of the pets that are calculated in that figure experienced rate increases over the past two months. Kelly? Yeah, so as far as rate increases go, so members will expect to see a rate increase for the most part once per year, so in essence, one-twelfth of our book sees a rate increase in any given month or sees a rate change, I should say. Sometimes that will decrease, stay the same. We are seeing our average rate increase, the average size of our rate change increase this year and in recent months, so that is more often than not the experience that members are going to be having with us, and so, yeah, you can see that those really started to roll through kind of over into end of Q4, beginning of Q1. We had some retention challenges that can be categorized as most related to finance or new rate. And we're starting to see that improve as we really focus on improving that experience for members. We can go to Jon. He's got his hand raised in the back. Great. Thanks. Good morning. I'm Jon Block with Stifel. I guess the first one, do you guys have all the price increases approved that you need or expect from the major states? Maybe if you could just talk to that. And then I think you alluded that it was as expected for April and May in terms of the level of inflation. If that were to remain, when would you guys recapture sort of that 71% optimized payout ratio that you're targeting? Thank you. Okay. So Aaron, Aaron is our North American pricing man. So he can kind of give an overview just in terms of how we are performing for rate approvals and how that's progressing. Thank you, Margi. So for rate, if we're looking at major states, we're still waiting on approvals in California and New York. To your point, we really pride ourselves on building strong relationships with regulators, and those states are no different. So we've been working, especially in California, with regulators on a regular cadence to answer the clarification questions that they have to get the filing through as soon as possible. So I believe we shared the number in our last meeting of 6% rate that was flowing through. In California, it's about 4% of that. And so that's the big one that we're looking to get approved to make sure that we have the rate that we need moving forward. And just a follow-up, maybe, Aaron Konichek, just in terms of the outstanding. So have we got all prices approved? Do you want to give an update on where we are since the Q1 update and in terms of how much we have flowing through the book now? I will. So thinking about, as a reminder, when we think about what we're pricing for in terms of inflation, that's 15%. We're assuming that that continues this year and into next year, the rest of this year and into next year. Through that, so we mentioned at the end of our shareholder visit, the earnings call that we had, that 6% outstanding, 4% of that is California. In addition to that, we have many large states and many big areas that also needed rate change that we can just get it quicker. And so since that time, I would say we have an additional 4% rolling through that was never even really captured in that 6% or captured now. So we still have even more rate rolling through. Right now, I think our average rate that we've been approved for the pet, so pets in the month of June, on average, are seeing about 17% of an increase. And so they only get it once every 12 months, so not every pet will see that, and it doesn't lift immediately. But that's about where we're at, and we do expect that to get much larger once we get California and some of the other major ones approved, meaning New York. As far as when we're going to get back, our plan, I mean, if 15% maintains, our plan is to be back in. We should get pretty close to it by middle of maybe middle of next year, I think, is about the right number for me because we've got to both price for the 15%. We've got to reprice for the miss that we're already at. We also then have to wait 12 months for that to flow through. So that's about where mentally, I think, we'll be. And it all just depends on what happens to inflation. So if it gets even larger, if the inflation steps up even more, well, then we're going to have to file for even more and just kind of keep pushing that more and more and more along the way. I don't know if that answered that question. I hope it did. It did. Well, I don't know who did answer the question. You can see on the chart here, Jon has his hand raised again, so we'll go back to him for a follow-up. But on the chart here in front of you on the screen, it just kind of reiterates what Jessica's saying. So you can see the blue line there is the revenue per pet growth, and then the orange is claims where you want them to cross over and actually kind of be on the right side. That's happening, as you can see here, back end of next year. That's based again on that assumption that with the 15% cost of goods remains. And should it go higher than that, then this obviously will change. If it goes lower, then you'll see that accelerate too. But we expect by the end of next year to have that 71 back in check. Just for an additional question, which is, I think you mentioned 6% price, of which 4% from California. And just off the top of my head, I think about California being roughly like 20%, obviously a big state, right, but 20% of premium. So that would lead you to like a percent, percent and a half coming from California. Why is 4% or two-thirds of 6% coming from California? If I'm thinking about that correctly, if that ties to what you said, and then if you could just talk about the timing of maybe getting that rectified. Thanks very much. Yeah, so the 6% is an overall lift. It's not the rate increase that we're asking for in California. So, that's just the increase that we're asking for is large. And so that would then lift our book 4% if we got it all the way rolled through. What's unique to California? Oh, I'm sorry. I actually didn't hear you. What's unique to California? Last one, I promise. That's okay. What's unique to California that makes it 20% of premiums but accounting for two-thirds of the overall lift to 6% if 4 is coming from California? And thanks very much Yeah, and that's okay. I mean, what we're really thinking about is of that 6, it's what's outstanding. So it's an even larger percentage of the rate that is outstanding because a lot of the states, provinces in Canada, we can get the approval right away, and that's just rolling through. So when I think about what this 6% is, that 6% is just of the states that we're waiting to get approval for, and California is just a very large percentage of that outstanding. Well, I'd also add to that as well. California as a state has got some pretty advanced medicine. So this is kind of cost of goods. And so you're seeing that kind of higher revenue come through. You've got a higher proportion of CT scans, MRI scans. They're doing the latest and the greatest for those pet owners. So you see that kind of slightly offset there. And then in terms of timing, Aaron, do you have a crystal ball? Do you want to speak to just a typical length of time? And obviously, we had, when we last had our rate approval in California. Sure. There's 11 pet insurers, I believe, in the state of California. Since 2020, the average time to approval is 321 days. We submitted our filing in December, and we're on a first-name basis with the regulators there. We're meeting with them, like I said earlier, on a regular cadence to work through the questions that they have. But we have a unique business, so it'll take a little bit of time for us to explain that business to them and have them feel comfortable with it. Yeah. And a last word, so I don't have a crystal ball. Our last rate approval in California was in November, so it's quite a long time for that clock to tick over the 11 months. Hey, Ma. I'm a pet owner from California. Can we bring back the chart about the P&Ls? Not yet. Slide 62, please. Takes a little while. Oh, yeah. This is the one. Kyle, tell us, what are the ones considered subscription? What are the ones considered other? I'll follow up on that. Oh, which of the P&Ls are subscription? Yeah. Yeah, they're all subscription business. So everything on this chart is in the subscription business, and all the P&L owners are here in the room today. So we've got a combination of products, countries, and markets within North America. I see. We have seen a lot of good analysis of numbers on the profit profile for the subscription business. Do you have anything similar for other? Because it looks like today the other pets, roughly like 45% of total, and it's growing. Do you have anything to share about ARR or LTV versus PAC? Also, a question about whether we have an unplanned conversion of some of that into subscription business, and what it would look like, not on PAC. Last one. At the end of 60 months, what is the percentage mix between the two lines? Okay. I think I can quickly answer that question. I think there is a reason it's called Other business. So it's a completely different business model. The subscription is direct-to-consumer, similar margin profile. We need 15% AOI, AOM target. The other is more B2B. As a reminder to everyone, there are several things there. Obviously, underwriting other brands like Pets Best is one of them. There's veterinary affairs. There's some worksite benefits products there. So they're all kind of different with each other. So we don't do LTV, IRR, those metrics. If you look at our public filings, other than total enrolled pets, which includes the other business, all other key metrics we report in the 10-Q is subscription business. And for Pets Best, yeah, we don't do any of the sales and marketing. That's all Pets Best. They take care of that. I see. So the metric is actually the AOI percentage, right? So what is the outlook for converting some of that into the subscription? Because subscription might be a more sticky business if you can convert it. Is that right? Are you planning for that? No. So the way that the relationship works with Pets Best is they continue to own those customers. We wouldn't market and cross-sell. If we wanted to for our core products, so PHI and Furkin, we could do that for Trupanion. But for Pets Best, it's a completely separate line of business. So they operate their business. They do what they need to do with their customers. And we would not cross-sell or bring them into the core subscription business based on that relationship. How about the mix at the end of 60 months? Would that be between the two lines? Would there still be like a quick? Yeah. As I said, for 2023, the other business is still going to grow, I think, roughly 20%-ish, even a little bit more, actually. I think starting from 2024, because of the rolling off of Pets Best, I believe our subscription revenue growth will outpace the other business revenue growth. And then go from there. There's a long tail for Pets Best, especially. Go to Shweta. And then, yeah. I just have a follow-up on the Free Cash Flow comment that you made exiting this year. Could you help us how you're going to get there and how we should think about it? Sure. Well, actually, let's pull out the slides of the cash position. I'll address that along with the cash position as well. While Laura is helping pull that outside. The Free Cash Flow, as I mentioned, we are seeing this is the inflationary environment, and we are doing the pricing to catch up with that. We're also with drive to meet the IRR guide rail, which, I'll be honest, is pretty difficult in the very sharp rising inflation, rapid rising inflation environment. We have a lot of muscles to flex to save, to try to save the Free Cash Flow to make the IRR within the range. Based on our latest forecast and the guidance we provided a month ago, we do believe operating cash flow is going to be positive pretty soon. I think for the Free Cash Flow position, it will be sequentially improvement quarter- over- quarter this year. I'm pretty positive that it will get to a positive Free Cash Flow sometime in the second half of this year. What we're doing specifically, so when we think about the three things that really go, or the four things that go into that cash burn, the first one is usually RBC. Usually, we would have to fund the growth and input that. We've already addressed that this morning. We haven't got to be doing that right now. We then have our pet acquisition spend, which is the bulk of what we have historically been spending. Then we have our development costs, which is the bulk of what Simon has been spending. And then we have our capital, our CapEx. They're all discretionary, those three things. And what we are doing is now we have created the foundation, the platform for our international expansion, for our new products from our partners, which was a lot of CapEx. We're in the midst of winding down or, I guess, completing the software development for our internal teams with Vision, which Kristen and John can speak to. That's where our CapEx is today. We expect to see that dramatically shift down. We actually have a slide in here that shows our CapEx and kind of where that's going to and where that's been. So we are turning the levers off and pressing the buttons off for development expense as much as we can, and CapEx. It's all discretionary. We could turn it off tomorrow if we wanted to. The key point here is we're building for the long-term, and we're balancing the long-term with the near-term growth, and again, being very disciplined with how our PAC is allocated. You can see here just Q4 to Q1, just on the chart, how much that will actually, if you look over the course of the last year, where our CapEx built up to, it's coming down, I would say, as steeply as it rose in this chart. So for the back end of this year, you're going to see that CapEx really come back down in. That will help us get to that Free Cash Flow positive. We're also looking at some operational efficiencies. And John, I don't know if you want to speak to kind of how you're thinking about operating expenses to bring that cash flow in. Yeah. So when I think about it, obviously, Chris can touch on the technical pieces when it comes to Vision. But we're building out Vision. We finally dipped our toe into the Trupanion subscription business in Vision and Claims. And we really are starting to build things, structure data in a way. And Jordon can speak to this. Once we're migrated fully into, which we are planning on for claims and policy by the end of the year, we're going to be able to put our foot back on the pedal for automation and claims and other things like that, whether we're actually building towards to today. So we're kind of in a holding pattern. But once we're fully into Vision, we're going to be able to expedite some of those things. So Chris, do you have anything to add? Well, I would say that the Vision platform, being that we're nearing completion, we're ramping down a lot of the engineering efforts. I think between now and November, we're ramping down the team by about 40 contractors. So that's hard cash. That just shows that we're nearing completion. Is it fair to assume that goes down as well? Yeah, absolutely. Yep. Yeah. Thanks Margi. Well, they gave me the mic, so. So I want to talk about P&L number two, the 11% IRR. I won't try and dissect what territory that is. But I want to think about PAC spend. And PAC is your customer acquisition team, marketing dollars, the payments to TPs for signing on new pets, whatnot. If you take one of the businesses that have 11% IRR, let's turn off the PAC. But how much of that PAC is really discretionary in that it's representing spend, not representing salaries and benefits and things like that? To what extent, when you have a territory or a large part of your business that's earning such a low IRR, how much of the PAC can you really turn off, and how much it needs to be in operation? Because that's how Trupanion runs. Yeah. It's a great question. So I will kind of kick this off and hand it off to one of the GMs. I don't know who wants to wave their hand at me. But just in terms of how we think about PACs, a couple of things. You're right. It includes everything. So it includes headcount. It includes licenses for our website. Anything that we have as a business that allows us to enroll a pet is in our PAC spend. Therefore, there are some contractual requirements that we can't just switch it off tomorrow. They're actually quite small. They're probably around 25% of our overall PAC dollars per, if you look at P&L. The headcount is in there. You can turn headcount off. It is a lever you can pull. But we also have areas within those P&L. So that's a market P&L that you're looking at. Within that market, there are neighborhoods that have got a much higher internal rate of return and neighborhoods that have got much higher AOI. Now, some of those markets are going to have smaller pockets than others. But as we think about how the GM is deploying that PAC and how they are thinking about it moving forward, what we're trying to do now in our focus of decentralization and reporting is really break down at a very granular level. Tom's team is entirely in PAC. How many of them are spending their time on P&L one versus P&L three? At the moment, we don't have an average cost. So it could well be that one of the GMs is not getting as much time and attention from the website team as another one. At the moment, we don't report that. And what we're getting to now is a more granular level. So this time next year, we'll be able to show you what is variable, what really can we touch, what can we not touch. But what we are doing is absolutely switching off some areas in markets where we know that we should not be growing, and that 11% is absolutely one of them. The good thing is, when you look at it in granular level, it's not a broad brush. It's very specific, and it's very similar to how we have deployed our PAC spend in the past. And now we're just doing it at a much bigger level across the different P&Ls. Any GM wish to add to that? M.J.? Sure. I can add to that. And you covered it very well. Thank you, as you normally do. But to the point of people, you can reallocate people to certain areas, right? You can reallocate resources. We've done several revs of kind of looking at our internal team that helps to support our efforts across the market and kind of determine where do we truly need you focused, where do we truly need the support, where are we getting the engagement of not just immediate enrollment, but more integrations that lead to future enrollments. So some of it's kind of planning for two steps down the road where we're going to get those enrollments through those integrations. I also think that I have a very broad market, several different areas in my market. I have newer growth areas, and I have very consistently growing areas. And those consistently growing areas are growing off of the relationships and the consistency that we have and have already built versus having to invest new and more. Where I'm looking at very good IRR areas, very efficient spend, that's where I'm putting the efforts. That's where I'm putting additional initiatives. That's where I'm focusing headcount that is in that PAC headcount cost. If I just add to that briefly, a lot of the headcount cost across all of PAC has got a performance-related as well. Much like a territory partner, you wouldn't be spending paying a territory partner unless they enroll the pet. The PAC team is similarly aligned in that regard. If I'm looking at this chart, the PAC for P&L two is $265 per pet with an 11% IRR, and the PAC for P&L one is $241 per pet with a 50% IRR. First of all, is the denominator in both those things gross new Pet Ads? Part of the reason why P&L two is so high is because you are indeed adding fewer pets as a proportion of the pet population there. If I look at P&Ls one through four, they're all in the $240-$270 range despite very, very different IRRs. To what extent can you flex in the—I realize this is very broad. There's only four P&Ls, and you have 100 P&Ls. But to what extent can you really flex and cut a PAC down to $150 per new pet at a time when the IRR is really not worth adding new pets? Do you want to speak to—sorry, you were fidgeting, so I thought maybe—No. Oh, okay. Sorry, Wei. I misread your body language. It's hard. I mean, it gets harder when you're reducing your margin very quickly. You can't just shut off everything tomorrow. However, the teams have been planning and very meticulously working together. So kind of the, Emily mentioned earlier today, how do we think about making sure, so in the P&L two with the 11% IRR, it is the gross Pet Ads divided by how much we're spending. But that's how much we're spending, like I said, across the board. So as we start to kind of look really granularly, without saying exactly where we're talking about, there are places where we are shutting off the spend there. We still get lead volume through our whole moat. You saw how much we've increased the vet channel leads. We're getting those through, but we're targeting the right pets rather than just broad brush. Emily, do you want to speak a little bit about how your team is thinking about applying some of the super discretionary spend, like online spend, and how that impacts it as well? Because that's pretty expensive. Yeah. So looking at this, I think, and obviously partnering really closely with our general managers, figuring out where are the areas that we do need to be spending. Obviously, our paid media, our online digital spend, that's something that can very easily come on and off tomorrow or two minutes from now. So again, understanding, aligning with the GMs, what are their goals? What are they seeing? Where do they want to be growing? And then pushing that budget there. It does mean that we're not doing anything on a grand country-level basis, but it does mean that the teams are really sharpening those skills on how do we get granular in terms of the area, in terms of the type of pet that we're enrolling. Yeah. Yeah. And I mean, if we go back to Darryl mentioned Berkshire Hathaway, if we think about how our job now as a business with multiple P&Ls is to ensure that we're deploying capital effectively. The lovely thing about carving this out and being able to see at this granular level across all of the P&Ls is there are areas where you can very clearly see we should be deploying capital more aggressively. I wish we had in Q1, but now we have this information. We can do it now in Q2 and beyond. And there are areas where we do need to slow down. I think historically, it has been a case of somewhat of a broad brush. We have been careful, but we haven't been seeing it at this level. And now we see it. We are completely agnostic to if the guys in Europe, I might have people throwing evil looks at me right now. If the guys in Europe can get a higher internal rate of return, they can spend more money to get into 40%, and the guys in North America can't, we're going to be allocating that capital where we can get the best rate of return. We now have more opportunity to do that with the expansion we've delivered internationally. And I'm excited to see the competition between all of them to ensure that they can get those rates of return to be priced appropriately, and then we can grow. Yeah. I can echo that. The Finance team hadn't been asked to do this level of detail before. It's something recently we're looking at a granular level to basically another job of my team is to produce the information at this level for the decision-makers to make the decision, right, on a timely basis, so. And just a quick time check. We're going to take one more question and then head to a break. I know. Yeah. Right there. Great. Earlier, you had talked about growing in areas with positive returns or hospitals with positive returns shrinking or putting less emphasis on growth in areas and hospitals with negative returns. Are there any unique characteristics about areas or hospitals with negative returns, whether it's average household income, speed at which claims are processed? There was a slide we talked about, I think 24% of claims were less than five minutes. Curious the unique characteristics in the areas with negative returns. Thank you. So M.J., I'll pass it up to you. Just to kind of clarify, it's not hospitals. It's neighborhoods, and we're thinking about kind of where would we or not. Often, neighborhoods will have more than one or two hospitals in them. M.J., do you want to speak a little bit to the commonality between any areas where you have a slightly more sensitive AOM versus those with a higher? Yeah. I mean, you can see this in definitely where you have areas that are growing. They're growing in the vet industry. You can see hospitals popping up in particular neighborhoods. Maybe a new specialty center opens up. And so the growth of an area, growth of the population within an area, and kind of the need for more veterinary care definitely plays a factor in there. I would say from a claims perspective, where we see a higher penetration of Vet Portal means different things to us. But over time, those claims go through automation. We're able to pay those claims through different methods that are more affordable. So where you might actually see areas that have better IRR, better MLRs in areas where we have more claims that are able to go through that automation process. So I wouldn't necessarily relate it to where we've got a penetration of Vet Portal and where we don't. Because also in the very rural areas where we haven't had a ton of growth, we don't have a lot of insured pets there just yet, but we're working on growth of those areas. We haven't seen the claims expense there. So it's very different and very diverse. And I think that the market approach allows us to kind of take that two, three, fourfold down and look at those things. But I wouldn't put a blanket answer on any one particular type of area is going to have a better or worse MLR. I think it's a combination of many things. And we have to balance how we're growing those different levers or pulling those different levers back based off of what we're seeing. Shall we finish with a word from the Territory Partner? David, would you add anything to that? Here's the good news. If we have to slow down in a certain area, I can't keep up with the amount of action that's happening every place else. So I mean, just now, one of my employees just signed up a hospital with a portal, right? This afternoon, they'll be installing a portal in another hospital. So we have enough business that my bandwidth and the manpower that I have, we're almost overwhelmed, which is a great thing because 13 years ago, they were kicking me out of hospitals, right? And today, they're open arms and begging us to come in. So how you allocate and what you do right now at 3% penetration, right? We have the world in front of us. And so that's how we look at it as Territory Partners. The opportunity is massive. Great. Well, we will break for about 20 minutes. Next, give everyone a chance to mingle, use the restroom, grab some water, and we will be back here at about 11:05 A.M. Thanks. Okay, thank you everyone for taking your seats again. We're going to get started with the next Q&A session. We'll run this session to about lunchtime. Okay, so we'll plan on breaking somewhere around 12:15 P.M. We'll go ahead and open up the floor for questions. Who wants to start us off? Any Shaw investors out there, please raise your hands. We want to hear from you. Okay. Hi. Laura? Yes. Okay. All right. For pricing, I believe today we do the once-a-year change, right? I wonder what is the consideration here? Because if I look at my car or insurance, they do twice a year, and they pay once for the whole horizon, and we do monthly payments. What are the considerations here? Is the other option would that be not as good? Well, it's funny you should bring that up because it's something that we've been looking at as we've looked at margin compression and just in terms of the way the product is built and how we have over the last few years, this has not always been the way. We have made an annual renewal. What we're looking at doing is to go back to what we did years ago when we were able to, if we saw increases come through, we would help that person in a budget and care for the pet far more easily if we could put more frequent rate prices through should the cost of goods go up. We have not yet done that, but in terms of modification to our product, that's something that we're looking at to give us more flexibility to allow us to have that. Much like the sense of we are a monthly subscription revenue. We've talked about this. Our pet owners, therefore, we don't think it's fair to give them bigger increases. If we can mitigate those and keep them lighter, easier to budget for, then we'll be looking to do that. We haven't yet taken steps to, but that's very much where we're going. Auntie Barryham, two questions. First, about the frequency trends post-COVID. So are you seeing, are they lower, same, higher than pre-COVID? And what kind of assumptions have you now included in the pricing filings? Mike or Jessica? Yeah, no, you can. All right. Well, so if we think about what we saw during COVID and then post-COVID, during COVID, we certainly saw our frequency drop because there was just a lot of people were staying home. Veterinarians were kind of closing their doors. They were doing things curbside. It was a lot harder to get in. So we saw that drop. Coming out of COVID, we then, I would say it was almost like a pent-up demand. It was like we saw it not only go back to pre-COVID levels, but then even go higher on the frequency count. Those, I think, have essentially leveled off. I mean, there is noise around the numbers, and they can kind of bounce around. But essentially, I would say the frequency trends have leveled off. And what we're now starting to see, though, is that our severity trends are starting to pick up. So it's now more about the cost of the invoice that's getting to us, not the number of invoices. So really, in our pricing, what we're doing to be thoughtful about that, I mean, one of them is we're being really thoughtful about the time periods at which we're looking to try to assess what trends are, right? We don't want to assume that they are either too low or too high if we're looking at either a dip through COVID or the increase through COVID and trying to make sure that we're taking more appropriate trends and accounting for time periods correctly. And then on the severity side, because we're seeing it come through severity, really just like very regularly, I would say quickly, often is the right word. Looking at our data, what's coming in, we're looking at it basically weekly. What invoices have come in? How often are they coming in? Which types of invoices? How much do they cost? And how does that vary across our regions so that we're able to keep up with any other trends that might be coming that we just hadn't seen yet? I don't know. You can chime in if there's anything else you want to add. No, that's a good answer. I think also we've been using some new data and some new data trends. As we think about the assumptions we're making, do you want to speak a little bit about what that data looks like and how we're building that into our rate filing assumptions to help regulators understand why there is a need for this rate increase? Sure. Do you want to talk about the data or do you want me to? All right. I'm on it. Okay. I would say there's lots of different data that we can look at. One of our very traditionally reliable sources of data is our own claims data. It's been very helpful for us to get to where we were. We understand how insured clients act differently. We understand that they're going to utilize their benefits. There's just a difference in the way an insured client acts versus us, I mean, versus a non-insured client. That being said, the claims data is limiting because it only shows us the claims that we're getting. It doesn't show us what's going on in the broader industry. One of the pieces, yeah, I'll pull in Jordon. You can talk about what else we're doing with this. But one of the other pieces of data that we're looking at is basically data from outside of the industry. Whether it's leveraging relationships with TPs and GMs and hospital groups and understanding how they're thinking about their pricing over the next 12 months or software data that we might be able to get at that can look at uninsured and insured clients so we can understand how invoices are changing. We're looking at what I would call our loss reserves on a regular basis, which is our way of looking at what claims have come in, how do we think they're going to project into the future, and what does that mean for today's liability? Things like CPI. Jordon, do you want to also chime in on that? CPI is a good one because it's an industry measure that we can point to that's really public. Yeah, I think we're pulling in about 15,000 external invoices every day. So it's about 500,000 invoices a month. We're looking at the correlation of how those procedures appearing on that and the changes in costs over time correlate back to our business and then using that to kind of forecast out into the future so that we can try and get ahead of any type of inflationary metrics that we start to see. Jordon, have we always been using that data? No. No, we have not. But yeah, we started using this probably, what, 10 months ago? Yeah. Yeah. And so still in the early stages from a predictive modeling perspective, but definitely something we're looking to invest in and build out in the future, so. Yeah. Dennis. Wei. More specific in terms of the Free Cash Flow comments. In what quarter, on a full quarter basis, will you be Free Cash Flow positive? Does that assumption include getting the increased rate approvals you need in states like California and New York? Can we pull out that slide again on the Free Cash Flow/cash position? So in terms of Free Cash Flow, as I said, we are expecting a sequential improvement every quarter this year. And assuming the same level of inflation, which we assumed a month ago, it should be in Q4, should be positive, if not early. But there's a lot of factors here and there. Keep in mind, Free Cash Flow, there's some timing differences. Your working capital, there's some timing difference there. So I don't want to be sound like too optimistic, but it is definitely in the right direction. And as I said, this is one of my priorities to make sure we're Free Cash Flow positive as much as possible, although still supporting our growth. In the guidance we gave, there's reasonable assumptions assuming some of the pricing improvements, like California and New York, for example, reasonable assumptions there embedded into the forecast. If I can be a little bit more blunt, Free Cash Flow end of the year in Q4, and no, it does not require us to have California and New York together. Maybe since we're on this slide, I'll talk about on the table, the very simple table here in terms of our cash position. So the $222 million as of year-end, the $244 million as of Q1, that's our on the GAAP balance sheet, that's our cash/short-term investments. And this is surely our view of the cash. I understand there's a different view of, okay, your insurance company, you need to set aside cash to satisfy the capital surplus of your insurance company. I get that. But I would also comment that I showed here that if you look from that lens, we have $36.4 million as of year-end at a Holdco or non-insurance company and $45.3 million. And we did draw $75 million of term loan during Q1. So that's the $75 million credit facility goes down to $40 million. So I do want to say that the $36 million and $45 million is just the cash balance at the end of period end sitting on the book on the bank. So it doesn't mean that's your liquidity. If you use the number to subtract to get to the insurance company's cash, it doesn't mean that's, okay, that's trapped there. It's not restricted. We have a restricted cash in a separate line on our cash. So just to clarify, it's the cash held at the insurance companies and as a part of insurance companies' assets to satisfy the capital surplus. We do have some levers to pull, whether it's through talking to regulators, let's say dividend, or some discretionary things we can do to get the cash if we need out of the insurance company. I wanted to stress that. So that's why we don't necessarily always think about, okay, insurance versus non-insurance. Okay, that's just a part of the reason. But I do agree there is a big part of the cash needs to sit in the insurance company to satisfy the capital requirements. Okay? But let's go a little bit deeper. Maybe I'll walk you guys through with a little math here, very simple here. Let's say we think through the things from the Holdco level from that lens. If you add the two numbers, $36 million + $75 million as of year-end, that's $111 million. If you call it liquidity at your Holdco, okay, let's just call that. And then that number gets to $45 millio + $40 million, which is $80 million as of Q1, Q1 end. So you subtract the two, $111 million - $80 million, that's sorry, $85 million, that's $26 million. 6% of the $26 million was actually a one-time capital injection we put into GPIC, which is the new Canadian insurance entity which is set up, CAD 8.5 million, roughly $6 million there. That's a one-time capital contribution. So if you put that aside, the $26 million is truly $20 million-ish. If you think about that, again, we usually don't think about that way, but if we follow through this lens point of view, it's about $20 million. That's called cash burn at the Holdco in Q1. And keep in mind that $20 million in Q1 is the worst margin in our history for a long time, a lot of Free Cash Flow in total negative. So even if you assume this cash burn rate at Holdco for, let's say, keep the same for the rest of the year, for the remaining three quarters of the year, that's $60 million. We still have $85 million as of March 31st. So wanted to say that. And I also think about that given the pricing actions, given the especially second quarter, given the Free Cash Flow we just talked about, I do think there is opportunity. This cash burn rate of $20 million in Q1 will be lower, especially in the second half of the year. So that will give us some room. Give or take, give or take $15 million, let's just say. I mean, we have $85 million cash at Holdco level, cash plus the remaining credit facility. And I also wanted to just going back to the comment at the beginning, that the $85 million, we have some opportunities here as well. As I said, there's some discretionary thing we can do to pull out cash out of APIC. And also there's some conversation with being starting talking with New York. As we are expecting us to be overcapitalized, we're entitled for dividend or some other things we can do. There are some other options we can do to free cash from the insurance company. So yeah, I'll just stop here. Just wanted to give this group an overview of the cash position. Questions? We'll come up here to Maria. Thank you. I just wanted to ask about, excuse me, about your Pets Best business. So, can you maybe talk about your expectation around sort of their willingness to continue to enroll pets with you outside of California and at more attractive economics now? And anything you can share with us in terms of maybe relative margin profile or relative economics now for new pets versus sort of prior arrangement that you had with them? Yeah, I can kick that off. I'm going to kick it off with a note, a statement actually from Pets Best, just so you just for everybody, everybody's safe. So Pets Best is a great partner. We've said they're a great partner. We've said it. We can say it all day long. It means a lot when they say it. So Pets Best is committed to offering Pet Insurance in an affordable manner and continues to work with various underwriters to support that priority. Pets Best maintains a good relationship with Trupanion as we continue to diversify our underwriting strategy to support our long-term growth objectives. That's from the Pets Best spokesperson, and that was this morning, so just in terms of expectations, they are a great partner. They are willing absolutely to continue with us until they are ready to roll off. They recognize the economics of the deal before, and kind of they weren't in our favor, and they've been great at figuring out, okay, let's get California on, and then they'll gradually roll through for new business only, so very happy to kind of maintain that relationship. At this point, we believe it will be at the end of Q4 that we'll see that kind of that new business cease with us. We don't know that for sure. It may well go further into the future, which is an upside for us, and then in terms of economics, wait, do you want to speak to the margin and how that's been since the new agreement went through, the difference in margin that we're getting from the Pets Best business now? In terms of AOM for the? [audio distortion] Yeah. Actually, I don't have that number in my mind, but the margin has been lower than our subscription business, right? In terms of the margin we're getting from them, the 2% versus the new agreement, and so the business rolling through at 8%, so we're seeing a greater proportion of that margin is staying with us than before, and that continues to be a healthy proposition for both of us, both parties, so the alignment between us is their growth can continue. We can continue to support it. It is lower for them, but we take a bigger margin. So it actually is a more benefit to us as a business. So as they continue to not only maintain their existing business, but add new pets, that's going to be a greater benefit to Trupanion. And then in terms of opportunities for new pets, would you mind elaborating a little bit more on that last part of your question, please? I think you answered it, but just in terms of so for the pets that are staying on the platform, are they staying on the old sort of under the old economics or sort of under the new economics? Moving forward, it's only revenue. It's a revenue generation. So as we from end of last year all the way through for the next three years and maybe longer, we've got them wrapped into a new one. It tears over time as well. Got it. That's very helpful. Thank you. Hi, Matt Chou from Lagoda Investment Management. Just following up on the Pets Best business, what run rate of growth for the other business at the new renegotiated margins would be sustainably self-funded from the business in terms of the capital requirements? And I think given Pets Best controls the marketing of that business, how can you be sure this other business stays within that growth rate that can be sustainably self-funded? Yeah, I can take that question on a very high level. This year, the growth is still there, not as high as before. So I think I have some very ballpark high-level growth data. 2021, Pets Best grew like 90% of earned premium. 2022, 60%. So that's kind of the reason. And also our old agreement with Pets Best is at such level of high growth; it's just not sustainable for us. Actually, it's not sustainable for them either. I mean, they were bought by Synchrony a few years ago. After that, they have been basically focusing on the top-line growth. But anyway, so if you put that into the given that context, 90%, 60%. So that's the reason this is not sustainable for us because APIC, our insurance entity, has to put a lot of capital at a not very high margin to support that growth. This year, after this new agreement, just to clarify a little bit, I believe the agreement is that we locked their existing book for three years at least. And then theoretically, after three years, they can choose to find another underwriter for the existing book. But practically, it's not going to be easy. I mean, I think everyone knows how difficult in the U.S. about the regulatory environment. So that's why I have been saying that there is a long tail for them to fully roll off. In terms of the new business, actually, they have options. They can either choose to be underwritten by another underwriter they find, or they can stay with us, but at a much, much higher profitability for APIC. Okay? And then to answer your question, this year is kind of the transition year. They haven't started, I think they haven't started in terms of new business to be underwritten by another new underwriter. Yeah. Just half. Yeah, just half, maybe. Yeah, just happened recently. So I think we're going to see some, I think we provided guidance a month ago, which is still the case as of today. Their growth is still but much lower than 90%, 60% as before. And to add to that, I think when we think about what causes the capital and having to increase the rate of capital and how much we've got put aside, that's taking an average run rate over a period of time. You're adding Trupanion's growth rate and Pets Best's growth rate, and that will give you the multiple that will take the RBC requirements to be higher. As we think about your question specifically around how can we be sure it stays within sustainable areas, Trupanion's growth rate and Pets Best's growth rate both have slowed down this year. We already are overcapitalized. When you look at that, you're not going to see as astronomical growth, which therefore means the RBC factor is reduced. We are also working closely with Pets Best to ensure that we know when they're rolling different states to a different underwriter and ensuring that we're in constant dialogue with them. So I think all in all, we feel very confident with what we've got in the forecast right now. We are happy that they're staying with us for longer on these improved margins. And these improved margins are there for a reason. They help us to ensure that we can continue to run the business as effectively for their book of business as we can. And I think in terms of sustainability, that data benefit is still there for us. It's great to have the relationship with them, and it's a good thing now, significantly better than it was last year. If you, let's say, two years from now, when they started to, the revenue started to decline eventually, yeah. I mean, I would say to answer your question, not only from that book of business, they're going to, the capital requirement going to be self-sufficient, but I would say also free up more capital for APIC. Yes, Antti again. You are regulated, and your pricing is limited, and kind of you know the expected profitabilities of the different customer segments. But how does it go in practice? So have you been able to refuse business from some of the low-margin segments? Or can you do that? Or is it so that in a way you try to get certain more profitable customers, but everybody that comes to you, you have to kind of enroll them, even if you don't like it? Tom, would you like to talk about our approach to Conversion and different leads? Yeah, of course. So I think as we've spoken about today, we can get incredibly granular by distribution channel, by geography, even looking at demographics now more and more. We can make decisions about how much we chase down business, by what channel, the level of investment that we want to effectively invest. So we've got many, many levers across multiple marketing channels in order to do that. So with the distribution that we have set up, we can effectively allow the distribution to come through. We've worked incredibly hard to build that. We don't want to turn that off, but we can use our data and our systems to effectively prioritize the leads that we potentially want to invest in more. I think just in addition, maybe Brian can share a little bit about how does the contact center react when someone is calling and we know that we have margin compression? What kind of conversations are happening there just to set them up for expectations that you're going to see a big increase when that money comes through? Yeah, we don't have those conversations when we're selling. We do talk about our pricing promise and that we don't price based off of age, but we do talk about the inflationary pressure within the veterinary field. So that's definitely a part of it. We want the pets for the lifetime of their pet, so we want to set that expectation right up front. Let's go right there. Yep. And then we'll go back to you. Yep. Hi, Terry Ledbetter with Kopion Asset Management. I'm new to the story, and I wanted to hear more on Europe. It sounds like ostensibly a more mature market and that there's been quality health insurance available there, at least in Sweden, for some time. And so I'm trying to understand the opportunity for Trupanion and why existing players there have not already canvassed that market well. And my following question to that is, it took a long time to build your flywheel of referrals in North America. It's exciting to see that gaining speed steadily, but why would it not take another 20 years in Europe? Simon? So I share a little bit about the dynamics of the European marketplace. An interesting one. If you look at the Nordic, the Scandinavian territories, penetration started in Sweden with horses in the late 1800s and the first dogs insured in 1924. They've been steadily increasing the level of penetration since that date. Currently, over 90% of dogs in Sweden are insured and about 53% of cats. Combined, that's about 67%. Norway is slightly less. Denmark's just under 60%. Finland's trailing at about 34%. So very much compliant culture, very, very established Pet Insurance marketplaces. Unless you can command the distribution at the new pet and new owner stage, really difficult marketplaces to penetrate. If you're prepared to spend huge amounts of money online and with big acquisition costs, you can steal from some established competitors, but a very, very mature market. Probably followed by the U.K. marketplace. After the Nordic territories, second most established and highest penetration in the world, probably still sitting at the 25%, 26% penetration with maybe another 30% of pets that were insured, could still be insured, had a bad experience, and have dropped out of the marketplace. With some of the big brands in the marketplace in the U.K. and high street brands with really warm brand values like some of the supermarkets. For example, you buy an apple from one of the big high street chains. It's the best value, and it's the cheapest. So it's the cheapest, and it's the best quality. You don't get that in a Pet Insurance product. A lot of those players in the U.K. marketplace, of which there are about 120 brands offering Pet Insurance, have set themselves up with very rich brand values for their customers, which transfer into their financial service products, which do not materialize. An expectation of top-line, top quartile coverage when you've actually got a quartile-one product. When one of the big brands doesn't perform as you expect it to on the Pet Insurance side, it's not that, "Hey, that brand doesn't work. Let's go and see what Trupanion or one of the other lifetime cover players offers." It's totally commoditized, and people drop out of the marketplace. It's a quite mature market in that respect. The rest of Europe hasn't followed suit. If I look at Germany with 11,000 hospitals, with a huge pet population, it's sitting there at about 2.7%, 2.8% penetration of Pet Insurance. So there are players. There are players that have copied some of the other products in the more established marketplaces in Europe. But what they haven't done is really apply themselves. They haven't engaged the key decision influencers in the marketplace. And almost to a man, what they've avoided is, in their world, the cost generator, the Veterinary sector. When actually the Veterinary sector is totally symbiotic with insurers, they're our partners, and they're the service providers. So it's crazy not to work with them. And I think some of the distribution strategy is based on online activity, based on content marketing, social media, or big databases of own clients. They get a limited footprint into the marketplaces, but they don't take those marketplaces forwards. So some real opportunities in some big territories. And I think if you pop the international slide up, I can share a little bit about our footprint at the moment in Europe. We are currently, as well as Australia, which is fairly established now, we're trading in Germany, Switzerland, the Czech Republic, Slovakia. We launched in Belgium in February, and we're about to launch in Poland this month. So some big, big populations of veterinary hospitals. And if you look at the box with the Australia, Czech Republic, Slovakia, Germany, Switzerland, and Belgium, we're live there. And we have some other territories that are our target territories probably over the next 18-24 months. Huge opportunities. But if I look back at my career in Pet Insurance, there wasn't a rulebook. There wasn't a blueprint. We've got it wrong along the way, but we've learned from those mistakes. So, taking the propositions that we have now, establishing that foundation in pet sector distribution, so primarily vets, forging that relationship, they're the ones that understand the quality and the need for the better products, but also engaging with other secondary intermediaries like breeders who also have an incredibly powerful influencing capacity on that new pet and new owner relationship in terms of not just to insure, but actually guiding them to make the right choice of insurance. When we put that foundation in place, these territories are completely virgin. So picking up the proposition, learning from our mistakes, and establishing it with the right product, the right coverage, and the right pricing means that we can really accelerate that process. We don't have to go through that very initial startup 23 years ago process because we have a huge, very successful North American business that's supporting those initiatives in Europe. I would add there that we've learned along the way too. So what Steve Rose started doing five years ago in Australia is not what we were doing 20 years ago in the U.S. Obviously, five years ago is really when we started to have meaningful traction on software installations, for example. That changes your growth rate. And so what Steve's done, and now what we're working with the other European teams to do, is basically leverage the state of the art in terms of what we know works across these territories, but modifying it with their help based on what's going to make the most sense for that country. Well, you kind of teed that up perfectly because I was going to put him on the spot. Dr. Steve Rose, do you mind kind of sharing a little bit about your Australian journey and how you have been able to take that insight and learn from it as you're growing Trupanion Australia? So if we come back to the remit of Trupanion in Australia, it was really about, can Trupanion work? Does the message work, and does the process work outside of North America? We knew that the North American business was growing, and does it translate well? Does it translate into Australia? Does the concept work? And that's what we're very deliberate about delivering in the first number of years. Will the veterinarians support us? Do they see the value in having a high-value product in the market and that experience? We did spend some time just prior to COVID to understand and to get that support with a small number of hospitals. Once we learned and understood what messages worked and achieved those goals, we then set out on our stage two to actually add hospitals and add partners in the market. That's really where this next phase of our business is at. That's about how does it translate, and then how do we build? Really the good news there is May on May, growth is three-digit figure growth, 150% growth in pets May to May. That's the story that we've got and what we're delivering. When we translate that across into other geographies, I think that's a very good message. Does it work outside of North America? Yes. Yes, it does. Steve, what's your retention rate? I wish you'd asked me this two months ago because it was north of 99%. Just dipped down to 98.95%. [audio distortion]. It kind of sucks. I think that's evidence of doing it the right way as well and to Ash's point, learning along the path. Thank you, Steve. Also in the international market, Trupanion's advantage is on the data you have in North America. Do you have the same kind of data in Australia or Europe? How can you be sure to price the way that your margin is good and your IRR is good, then you can grow profitably? Simon and Jess? So if I kick off in terms of the data front, obviously in some of those territories we are trading, we have our own data. Certainly not the volume of data that we have in North America, but we also have partners, some of the software companies that we can also share and take data from. So between our own data, between marketplace data, and between if you take Germany, for example, there are tariff bands for the veterinarians for guidance for the veterinarian at a sort of minimum level than multiples of those, which we can get regional differences in costs. We can also obviously share that across the North American data because an incredibly rich data seam which will give accurate pricing in terms of breed and in terms of breed and age. So overlaying that into the data we're getting in Europe, looking at some of those geographical differences mean that we should get base pricing to launch in these territories. Let me pass over to Jess for a more granular and technical. I mean, you basically said it. So the way we've thought about this when we think about Australia and Japan and some of the other areas that we're going out and starting to price now, when we do have the data, we use it. So we are partnering with some of the PIMS. We have some partners that we have that already have existing claims data so we can kind of understand what an insured population looks like in that area. Where that data wouldn't be very helpful is what does that mean for Trupanion? Because the Trupanion product is oftentimes very different than the product that's being currently sold in any given marketplace. And that's okay because we would expect insured clients on a Trupanion product to act like insured clients on a Trupanion product. So once we can kind of understand how the pets would act, how the frequency would come in, the behavior of an insured client, then all we really need to do is just layer on those additional pieces of information like geography, like distributions by geography, or level of costs, and what kind of severity we would expect depending on the mix of hospitals and pets from that insured marketplace. And that has gotten us pretty close so far. Can I ask? Sure. Please come down. Richard is coming to offer some insight. Hello. We also, as far as the rates are concerned, we do not have our hands tied behind our backs in terms of filing. We don't have to. If we ever want to change the rates, we can change the rates in Europe. We don't have to go to states, regulators, or anything, which is a bit of a magic button for us. Follow up? Okay. I'll follow up on this. Do we have any early indicators, or even look one, for international market growth with our profitable groups? Any early indicators for that? I think if you look at our 16-month plan, we have a fairly high-level goal of 10,000 veterinary hospitals. And just looking at the marketplaces that we had on the screen, that we have an ambition to be live in across this 16-month plan, I mean, 10,000 transfers into a potential of 50,000 hospitals. We're working with a lot of the PIMS providers already starting to integrate in preparation for putting the technology in place, the Trupanion brand, pricing, and product so that when we go live with the Trupanionization, we'll have integrations with a lot of those territories. I could pass over to some of the team, but if Derek talked us through the integration strategy that you had for the Czech Republic and Slovakia. So thanks. Yeah. I mean, I want to answer some of the questions. There's so many things I could talk about here about what we're doing in Europe. It's a great group of questions. Yeah. And I was speaking to some investors outside, and they asked, "Why Trupanion?" And we've always had this ethos from the beginning when I founded PetExpert, is always be right, better, and different in everything that we do. And the great thing about Trupanion was they shared the same as Darryl and the team shared the same philosophy that we have. And this also meant that we had to be different about the practice management systems working across Europe. Our integration with the practice management systems is absolutely seamless. Now, these are great buzzwords. Everyone says it. Fully digital. No, we really are. So that really means is that we're able to handle a claim from one of the pet parents within seconds. Not minutes, not next week, not six weeks, three months, immediately. And we solve that problem, which is an emotive problem because they have sick cat or dog. And it's an emotional time. The last thing they want to think about, especially in these times, is, "Have I got $3,000 in my pocket to pay for that orthopedic surgery?" They don't have to worry about that with us because it's done. The vet doesn't have to worry whether that person is going to pay the bill because it's done. So the practice management system is key. So in most territories across Europe, the practice management, there's only several within each country. Now, please say in the territories that we currently work in and where we will work in, we will be fully integrated into those systems. And that really means it's simple and different and better. Any other questions? Okay. We've got them over here. Thank you. Just another question on Europe. So I think you are using a different underwriter across Europe. Can you maybe just talk about that and sort of what's the process of getting your own underwriter license in Europe? How long is the process? Sort of how complicated is it? And will it help with pricing once you get the license? So many questions there. I will start with we don't work with one underwriter across the whole of Europe. In the territories that we are where PetExpert is now, we work with KBC Insurance. And KBC is a Belgian bank and one of the leading banks in Belgium. And they have an international representation, and we work with them. I think the other question Simon can answer. Yes. And the subsidiary CSOB. Yeah. So we work with the daughter company called CSOB where they can passport their license across territories nearby. And then in Switzerland, we are underwritten by ERV, part of Helvetia, and in Germany by Element. And the plan is to pursue our own license in Germany through BaFin, the regulator. We think it's about a 12-18-month process, which has started. So that's where we're on the way to have our own license with Germany. And obviously, with the other 27 countries in Europe, we can passport across from that license. Within Europe, we can't in Switzerland. So I think looking at perhaps our relationship over the last 20, 23 years in Canada, now we have a great relationship with ERV. And if we can get the right terms and economics in place, I see that being a long relationship. They're a very, very supportive partner. Should we head up into the Nordics, we'll probably have a similar situation with Norway. But certainly, Germany makes sense for the heart of Europe, and then we'll gradually step out and leverage our own license passporting across the European Union. Okay. We've got it. John Barnidge. Done. Can you talk about your plans? I mean, you've talked a lot about Europe and Australia. I know a year ago you talked about hiring a country manager for Japan. Can you maybe talk about your plans for that marketplace and maybe how that's going to look different than other markets? Thank you. Yeah. So Japan is an interesting market. We talked about the Nordic territories having the highest penetration of Pet Insurance in the world, followed by the U.K. And for the last 15, 20 years, Japan has been number three. So 10, 15 years ago, it was 10%. It's now sort of 13%, 14%. So an established line of personal lines and a line that's normalized. So pet owners in Japan know they can insure their pets. I think we explained the background to the attraction to the Japanese market. One of our key strategic partners in North America, Aflac, are also very big in Japan. I think they have something like 15 million customers, huge footprint, and a really high brand presence and brand awareness. We looked at partnering with them to move into Japan. And Japan, very different culturally, different marketplace, very, very, very different Pet Insurance propositions in the market. So a design not to put prices up, but to reduce cover over time and some very, very high commissions paid to pet shops, for example, for the market leaders, meaning the value proposition for the customer is really low and dire. So the marketplace is lined up very much for a top quartile, high coverage product. And also, the Veterinary sector has not been engaged at all. And the way that the insurance companies work with the Veterinary sector, they put quite a lot of onus on the vets to do primary assessment of claims. Hugely bureaucratic process, putting lots of or drawing lots of time from the veterinary hospital. So, with the technology we bring to the marketplace is the ability to engage vets significantly better cover, offering a significantly better value proposition for the customer with a partner that is a high, high, high-profile respected brand in the territory because there does need to be that sense of made in Japan in things that we're doing. I think with the ingredients to have a really successful business. Now, that said, it hasn't gone quite as swiftly as we hoped. I think the first thing we needed to or the barrier we needed to overcome last year was getting an insurance license for the Pet Insurance entity. And that was with a number of regulators quite concerned about the Pet Insurance sector in terms of their sustainability, in terms of the value proposition for customers. That was taking increasingly long, long, long amounts of time. Probably around an expectation of two to three years to get a license in the first place. We worked with the regulator, and there's a very small book of business that was in administration that the regulator was looking after. We agreed with the regulator that we'd take that book of business, look after it, put it back into an even keel for it if they would grant us a license. We got a license in three months at the end of last year. Part of that negotiation also meant that the regulator committed to approve a Trupanion-style product in six months. That was also potentially another two-year process to get that over the line. By the end of June, we should have a Trupanion-style product approved by the regulator. We have our own license, and we've slowed the process down and phased it. So phase I will be to migrate that small book of business out of the Trupanion products. And at the same time, we're kicking off the veterinary distribution engagement, so pump priming for veterinary distribution and some of the integrations we're putting in place and the territory partner model. I think that's probably a 10- 12-month process to build up to launching into that sector. So we will make sure that the software and the technology is live, the Veterinary sector is ripe to launch probably around the end of quarter one next year, beginning of quarter two. So phase II will be the launch of the Trupanion technology, Trupanion-style product into the Veterinary sector and the Veterinary engagement. So we've slowed Japan down because there were so many moving parts, but some real progress on potentially some of the real blockers to entering that marketplace. Okay. We've got Jon Block. Great. Thanks, and good morning again. I guess if you guys can give some specific examples of how you've been able to lower the PAC by roughly 20%, the levers that you're leaning on, it's a good amount of dollars, and it's pretty impressive. Maybe just some color on the same number of leads, is it increasing conversion, how that's played out. And then second question, admittedly different topic, but can you just talk to the company's pricing challenges? And was that Trupanion specific, or was that pervasive with others across the Pet Insurance industry? And sort of in retrospect, if you look back, one of the main assets that you guys have talked about is having a lot more data than some of your competitors. So now when you're looking back and reflecting on what went on or still what's going on, why don't you think you're able to better leverage that data in order to price more appropriately? Thank you. Okay. So thank you for acknowledging what the team has done with PAC because you're right. To do that 20% reduction that quickly is not an easy task. And I think, Emily, you can probably speak to how we've done that in certain instances. And then maybe we have a different general manager on the stage. Jason has switched places with M.J.. So Jason, can you maybe speak to that from your perspective as well from the vet industry? And then Tom for conversion and what's happening there. Yeah. So I think at a high level, it's really understanding the types of leads that we're getting, the types of pets that we're getting, and their propensity to convert and their lifetime value. And so when we do have a lead come in, what we're looking at is how much is it going to cost us in order to convert that lead. We spend a certain amount to acquire the lead and then a certain amount to convert as well. And I think I don't want to step on Tom's toes too much, but looking at how much is it going to cost us to actually convert that lead and what are the resources that we're putting in. So I think our digital spend is probably the easiest example to talk about or the most straightforward as well. We think of that very much as a conversion tool. So looking at how much are we spending on our branded search versus generic search in what markets, what are the types of pets that those very specific campaigns are getting, and how are we fluctuating our spend based on the data that we're seeing. And then Jason, do you want to speak about kind of vet leads? And we have a slide, I think, that can show where our lead volume is tracking year-to-date. Yeah. I mean, I think how I would summarize the vet space right now is we're humming. From a lead perspective, you can really see how TP Nation has really started to leverage the relationships that they have been working on for all these years. I think a common theme that you've heard so far today is we're being far more strategic in our approach. We're no longer painting with that broad brush, as I think is the expression we've used a few times. So specific to the vet channel, we're doing the same. There was a time where we would go after that 13-year-old pet, which we love all pets. But when you think about from an experience perspective, enrolling your 13-year-old is not going to be as ideal as enrolling your young puppy or kitten. And so we're fine-tuning that same strategy, that same approach within our veterinary partnerships where we're really doing more to go after those puppy and kitten opportunities. And we can do it. We have documented success. We have territories that we are. If you look at the enrollment mix, the percentage of pets that are under one, as an example, is north of 70%. So we're really executing at a very high efficiency rate in that category. And again, I'll go back to the fact that we're just putting emphasis in areas of the business that makes the most sense for us going forward. Tom, Conversion? Yeah, for sure. So if we looked at actual conversion in terms of our, to Emily's point, understanding our leads, understanding how they perform, and then actually flexing our approach, it's about personalizing the experience. And in certain ways, Conversion is about art as well as science. So if you looked at, say, conversion rate here, you can see, look, there's some marginal gains. But actually, if you go kind of a layer deeper, and if we flip to the web conversion slide, we can actually see that we've seen some really big shifts in our web conversion. So we're seeing more and more people going to the website. That's not to say that we are turning off our contact center. The value of our people is incredibly important, but we also have to modernize our approach to communicate our value proposition correctly right across the website. So we are seeing some really good movements there where we're also seeing some rates flowing through, but we're still seeing that growth, which is really, really encouraging. There's a huge amount of work still to do there, and there's some really exciting things that we've got coming up, which Suzanne can probably speak to. But for anybody, like I'm sure many of you have been to our website, we genuinely believe that we have the best Pet Insurance proposition globally, and our website currently does not reflect that. So we've got a bunch of exciting work coming up in that area. And I don't know, Suzanne, if you'd like to speak to more to that. Sure. Yes. Hi, everyone. Yeah, we're investing in our web platform. We are in the final stages of testing our new website, which we'll release later this month. And really, it's about replatforming to give us the best sort of site speed and performance, to give us the best UI and UX, the experience that sort of pet owners through the site have, and that really communicates the value of Trupanion and how we're different to other insurers that are out there. We're also focusing particularly on the mobile experience, which we know is less than ideal on our current site and is a really important part of our digital mix. We see that new website as a real foundation for future growth of our conversion rate. Phase I is phase I. We see the need to continually optimize that kind of experience as we move forward, but it should give us a real good platform for growth from here to start to move towards our 60-month plan. Okay. So Jon, at a high level, more disciplined, increased leads, increased conversion rate, and we're seeing an increase in retention rate, which obviously helps as well. So the next part of your question was specifically related to pricing and data and was it across all the Pet Insurance industry? So if I talk at a really high level, when we think about the industry at large, we can see everybody can see the increases going through the industry. Competitors are putting through big increases as well. It's not just Trupanion. What I will say is the nature of our product and the channel through which it's sold, the vet channel. We talk about our active hospitals being close to 17,000 active hospitals. When you think about that number, the people that come to Trupanion are people that go to the vet. They think about their pet as a member of their family. They have pictures of their pet on their phone. They celebrate their birthday. They are going to be going to the hospital more frequently than any pet owner. So we know we already have a propensity for people who are going to use the product. Our product is the broadest. It is the most comprehensive. It is unlimited. And when you put those things together, we are going to see a greater usage likely than our competitors. So when we think about our data, could we have better leveraged it? Absolutely, we could have. And what we've been doing in the last quarter, and Jordon can speak to that, is really kind of diving in to understand where are the differences? Where are the things that we miss? How granular can we get? Jessica mentioned that we're looking at our data insights on a weekly basis. That's not just at the pricing level. That is across the business. So every GM, every channel owner, the pricing team, the BI team, they're all looking at what do we need to do with the support of the finance group to ensure that we are on top of any trends that we're seeing come through quickly. Jordon, would you mind just speaking a little bit to the data and how we are better leveraging it more specifically? Yeah, absolutely. So I think before we were being very reactive. We were getting data. There's a delay with our claims data. But now, in the last 10 months, this new data source that we're bringing in, we're looking at how it correlates back to conditions, procedures that we see within Trupanion's claims data, and then kind of forecasting that out and moving more into a predictive modeling style, machine learning-based, what does the future look like for us, and then passing that data along to Jessica's team. So I mean, we have a team. There's a very high degree of collaboration occurring now that I don't feel like we really had back then, that we had data scientists, data engineers, data analysts, actuarial analysts, and then the actuaries themselves all working together on a weekly basis to kind of create this really forward-looking model. Yes. Yeah. I mean, I think Jordon just said it. I completely support and agree with the level of collaboration, the way we're looking at it differently. I mean, that's part of what makes us, I think, better is that we're actually looking back and saying, "What did we miss? How did we miss it? Why did we miss it? And what do we do to make sure that we don't miss it again in the future?" and just really trying to leverage the skill sets we have on the team to get ahead of that for future stuff. I think maybe this leads into the frequency of filing as well, so what are we doing to give you assurance that we are not only taking that data, but we're acting on it? We have a slide in here that talks about the number of filings we've done year-to-date and how that's different and how that's stepped up. Mikel, do you want to speak a little bit to that? Well, starting last August, we really hit the gas in terms of number of filings. I can't see the slide all that well. You are right. That's what it says. Yeah. I would like to say we're slowing down. We're not slowing down. We're continuing to go. I am very much watching whether there is going to be another inflection point because we don't want to run rates too high. But until we're caught up, that's just part of the tension in our thinking. I mean, one thing that I do want to go back a step. Our claims data is an incredibly rich data source. It's the best. And because we have such high retention, it's very meaningful information. When you look at that information, it is from the past. So what we did last year wasn't so much in the way we analyzed our data. It was the frame in which we put around the data and the way we thought about it. We hadn't seen higher trends. We had been locked into about a 6% trend for a long period of time. We expected to see 6%. We heard rumors. We heard anecdotes. We heard from TPs and Darryl and other people who talked to vets, but we hadn't seen it in our data. We needed to see it and measure it before we acted on it. What Jordon's doing with this other data is helping us put a different frame around our data so we can say, "Oh, that June claim spike wasn't just a noise point. It wasn't just a fluctuation. It was a trend. It was the beginning of the trend." So by adding these frames and viewpoints, we will better interpret our claims data, but our claims data is still the primary source of truth. Can I also just add something? Not from financials' perspective. I just want to make a point here. If we reflect what happened in the past three years, this is a great lesson for everyone, for Trupanion. Before, in the past 10 years, before COVID, the cost and the pricing is like this, 5%-7% every year, right? And I don't want to speak on behalf of you guys. I feel like that makes everyone feel, "Okay, our pricing job is fairly easy," right? I don't want to say that, but something like that. But if you think about what happened during COVID and then now, it's like this cost. First, there's a tailwind for cost, right, going down, and pricing is still good. We have a margin expansion 2021, 2020, 2021. And then all of a sudden, post-COVID, frequency comes back. The inflation is rapid rising. We've never seen 15% before. So the past 10 years, we've assumed this. Now, it's like all of a sudden, this, and then this, right? This is where we are now. It's a much narrower margin. I feel like if you think about from the risk about this industry, about the pet health insurance, about Trupanion, we have learned a great lesson in the past three years that things could go like this way. And now, coming out of this period, looking forward, we can manage this risk better if we get through this. That's just the point I wanted to make. I just feel like this is very important. Quick time check. We probably have time for one more question before lunch. We'll go to Katie. So it sounds like you guys have gained access to a lot of new great data, a little bit more inter-team collaboration. That all sounds awesome, and I hope that it enables you guys to be more predictive in the future. I'm kind of just curious if we need a little more clarification on why Trupanion failed to leverage their data this way in the past and what you're doing to ensure we don't drop back behind the ball again going forward. Yeah. I mean, I think there are a number of people on the team that probably can speak to this. I think just that when we think about why didn't we use the data, Jordon said it well, that there wasn't the same level of collaboration that we have today, which meant the communication wasn't necessarily there between cohorts. And so that really is kind of the main point. As we grew very quickly, and you saw the numbers on the chart, kind of where we've been going, that's been a consistent growth rate, that run rate. As you do that, naturally, people get into their silos. They naturally start to focus on the areas. And you see it time and time again is that Trupanion was not unique. There was a growth curve. We're going through double-down focus, do your thing. "Oh, you're doing something next to me. I'm not going to look over and see what you're doing because I'm focused on my goal." And really, what we've done is take a step back and make sure that we've got absolute clarity across the organization. What is everybody doing? Are we in lockstep? And that's where that decentralization comes from. So ensuring that we've heard several times the GMs in conversation, making sure that these teams are talking on a very regular basis gives you the insight and then allows you to go and sniff out the, "What's happening here? Is this actually something that we need to be reacting to, or do we need to monitor it?" And that's where I think the data points that Jordon's team is really pulling through. We've also stepped up our BI team and pulled them all together under Emily's remit to ensure that we've got eyes, and every single team has got a BI representative. So regardless of who you are and what you do in the company, you have your dataset, and that helps us to stay on track. So we've got points that we can inspect. We know what's expected of each team, and that reporting will give us an insight into how it's trending overall. John, would you mind speaking a little bit to how, in your role as heading up our Global Operations, how are you bringing the groups together to ensure that you've got eyes on what's happening from claims, what's happening from a data key perspective? Yeah. I think it kind of goes. I mean, that's a whole bunch of stuff, right? Obviously, there are a bunch of meetings that happen. But I think ultimately, what I've tried to do since stepping into this role is really start to connect a bunch of people that maybe were kind of connected but weren't really connected throughout the business before. And so that's going for Tom, Brian with Jordon, Chris with Jackie, and really trying to bring them all together because, obviously, when I take a look at it, there's a tremendous opportunity that we have with the data we have, and we maybe haven't utilized it in the way that we could have in the past. And with the improvements that are coming within our software, within Vision, we're going to be able to see things a lot better, utilize a lot more data, and become much more proactive in what we've kind of done in the past historically, which is kind of always take a look in the rearview mirror and kind of look backwards versus now we're going to be able to move it forward. And I think ultimately, with the decentralization that we've had going on, working with the GMs, they all have ideas for their certain markets, and creating teams on my side that can support all of them in what they're trying to accomplish is one of the biggest things that we're currently working through right now, but we've made a lot of progress on that front. Great. We're going to take a break for lunch for about an hour. We'll come back for our third session. I just want to note for online participants, there's several questions in the box, and we'll be pulling on some of those key themes from the box and making sure that we hit some of those questions. Okay. Thanks, everyone. Can everyone please take your seats again? We're going to get started here in a minute. If everyone could take your seats, we're going to go ahead and get started. Okay, thanks everyone. We're going to start the third Q&A session. This one will run a little about an hour. This is the third and final session with this team before we then have Margi and Darryl up on stage. So think about what questions you want to make sure you get covered with the team prior to the day being over. If you have any questions, again, raise your hand. Vince here will help bring you the microphone and Margi, I think we're going to start with just an update on claims paid. Yeah, so Laura, do you want to press the button? Thank you. We, and again, this is our as it goes ticker. This number has gone up by $900,816. There we go. Laura's going to steal that. It's so close to $1 million since we started today. That's how many pets we are helping every single minute of every single day. David, welcome. If you didn't know that, now you do. Go and spread the word because it's, again, it's a reminder of why we're all here. Just in a short space of time, $1 million worth of treatment has happened because of the team. So on that note, we are excited under these very hot lights to be here for the afternoon. So, welcome your questions. And yeah, let's hear from you. What would you like to know? We have people here who can represent Chewy, Aflac, State Farm. We can talk about anything you like. All right. Thank you very much. Excuse me. Can you please talk about Chewy's sort of, what your stance there is, what's the rollout looks like? Thank you, Maria. Bradley. Thanks for the question. So Chewy's rollout's been great. So we have been rolling out since last year. This time last year, I think I talked about the foundational approach. We're live in 44 states right now. We'll go live with our 45th state in July. In May we launched in New York and Florida. And we've been seeing some super solid month-over-month growth. Chewy's just started to roll out their marketing plan, which has driven some really nice volumes. We've got a handful of states left to go in our national rollout. Target is to complete that this year. Do you want to go to my slide? Just to give you a sense of how Chewy is performing, I have a line chart here. So since we launched, you can see we're seeing a solid upward trajectory in terms of unique pets enrolled and policy sold. So the two lines underneath the blue one, which is pets, are the wellness and insurance products. And so we have said this in earnings comments, but we expect Chewy and other new products to contribute 10% of our overall gross adds this year. And then we don't expect that to change much going into 2024. So things are going really well. Chewy will continue to evolve their marketing strategy to drive that additional volume. That's great. Hey, good afternoon. Brian Pirie, Reade Street. Margi, I'll take the prompt. I'd love to hear a little bit more about Aflac and State Farm. And if you're happy with those partnerships and how you see them developing over time. Okay. Start with Aflac. Kelly. That was awesome. John told me that he had told people to make questions. I didn't know it was Margi that was going to cue it up. So here to talk about Aflac for you. So things are going okay, right? We love our partnership with Aflac. We're super excited for it. We're very deliberate in some of the things that we are doing. We have some things that are coming up here recently and coming up really shortly that will help improve some more things that we want to do. We're a big growth company, right? We want lots, lots of growth. Aflac is big, right? Sometimes things go a little bit longer than we want, but they're great partners and we're excited for it. All right, here we have some of the states that we're working on. We're in 48 states. Two of those states just came on. We just got approval in Florida. We had policies going live last month or this month, sorry. New York, we just got approval this month. We are fast-tracking that and hopefully have policies that we can start enrolling next month. Just found out that we were able to file in Idaho, so there's an update to that. We just filed it today. We expect that to go quickly as well, and so we're still just waiting on California and Washington. We're having really good conversations with Washington, so hopefully here in quarter three, but we have people that can speak more to that. Some of the other things that we want to talk about with what we're looking at, so some positives here. Maybe on the next slide, we can look at it. We have a varying mix of products, three different levels, and this is something that's very unique to the worksite space, and it's marketing and trending where we want it to, so we're seeing that the value that we have in our core product, which is similar to our unlimited product, is still where employees and individuals are leaning towards. Our other products are, again, falling in line with what we have predicted. The other thing that's not up on this stat is that we are doing slightly better than what we have predicted from our conversion rate. From quote to sold, we're doing better. So we like that. So things are very, very encouraging. The next step is just to continue to make sure that our broker partners and clients are aware of us. We wrote a group the other day, and this is a testament to our partnership, right? So here's a group that we just sold to that are enrolling right now. The CEO there has a pet that's with Trupanion. And he has told us in an email that came out how excited he is with Aflac Pet Insurance powered by Trupanion. He wants to be the president of our fan club and so happy about the things that we offer and the unique things that we bring to the market. So it's out there. We just got to continue to push awareness, and the growth is going to come. Kevin. Yeah, can you take the mic please? I have a question for you on the potential impact expected from State Farm this year and the next year, and then I had a follow-up on Chewy, actually. How do I expect State Farm to impact what we're doing on Aflac? On your P&L this year on gross adds or? I think that's the question for Kevin. That's for Kevin. So just Aflac. So I mean, it's a different worksite product. From Aflac. I'm sorry, not State Farm. Yeah. So I guess repeat the question and not on. Contribution of your Aflac partnership this year and next year. Yeah. We're not anticipating it to be impactful this year, but next year we are definitely hopeful. Again, with the things that we have lined up right now, and as long as things go as we planned, right, the partnership should be starting to pull through. And then can I ask a question on Chewy or is that okay?. I can step down My follow-up for Chewy was Lemonade has a partnership with Chewy as well. And so I guess the question, you can choose how you want to answer it, but how are you tracking versus your own expectations and what are you seeing in terms of that Lemonade partnership with Chewy because they expanded into Canada too from what I understand. Yes. Great question. Thanks for bringing that up. I can't speak directly for Chewy on anything related to Lemonade. I can talk about the Trupanion perspective. Chewy launched their multi-vendor strategy about a month ago, a month and a half ago at this point, and that would be the launch of Lemonade. We haven't seen any significant impact in terms of volumes. We've been seeing, as I mentioned earlier, month-over-month growth. It's actually been steadily increasing as the marketing efforts by Chewy have increased. We anticipate that to continue. The answer is what I said previously. We expect Chewy and new products to contribute about 10% of our overall gross adds. That's consistent for 2024 too. No impact at this point. Kevin, do you want to update us? State Farm? I know it. I think this was a setup at lunch. First, Betsy, our newest Board Member, I just want to proudly say that in the past seven minutes, we've engaged 10 more State Farm agents, so we are moving in the right direction. Oh, you have the slides up? Perfect. Let's be transparent. This is a large ship that we're moving with State Farm, a 100-year-old company vast and ingrained into the communities that they serve, and it has great potential, so we're not at the place that we would ideally like to be. However, over the past 18- 24 months, we've seen significant improvement, and we are trending in the right direction, as shown up here. Year-over-year growth, steadily increasing. We have greater engagement from our agency force, where we have approximately about 68% of the overall agents authorized to sell, which indicates through an increase in our cold volumes, as well as our conversion rates, where we have had an increase of almost two points over the past year and a half in our conversion rates, which means that our engagement levels are starting to stick. We're starting to get greater impact in the local communities as they better understand the ability to bring in new households through the doggy door versus the garage door when it comes to Pet Medical Insurance. So that's where we stand now. We are moving forward, Betsy, moving upward, getting more people engaged, getting a higher conversion rate, and steadily with our quote volume. So it's a great story there. Oh, thank you. I forgot about our first-time enrollment. Yeah. Another interesting fact that is with our partnership is that with our agents getting more engaged, we're starting to get agents involved in the quoting and enrollment process sooner in the sales funnel. That is a great indicator that our messaging is taking hold, that their level of engagement at the granular level for the agent as well as their team member is starting to resonate as they become more comfortable with Pet Medical Insurance. Any other questions? Did I do a good job? All right. Good. Thank you. Thak you, Betsy. Thank you. Yes. Great. Thanks, Jon Block from Stifel again. I think that one slide showed that Aflac was withdrawn in California in favor of Trupanion's core product. Can you elaborate on that? I'm guessing it's a function of Prop 103, but maybe if you could just detail that. What does it mean, if anything, for Chewy as well? You mentioned, I think it was 44 states going into 45, but is California one of the 45 or one of the five not? If you can provide some clarification. And then the 10% of gross adds from, I think it was Aflac, I believe. This is my model, so my numbers, but if you back out the 10% from the gross adds estimated in 2023, you get very, very modest growth year-over-year, probably sub 5%, 10% in a market that's only 3% penetrated. So can you detail why we'd see that level of deceleration in the gross adds ex that new initiative? Thank you. Yeah. So I'll kick off and hand off to Jessica as well. Just in terms of California and conversations with the regulator, we are eager to get that rate approved. We've been working with them. From a Prop 103 perspective, in the last conversation, we had the discussion where they said, "What is the let's understand Aflac?" The conversation very transparently was, "We want to get the core business approved. If this is going to delay it, we worked with Aflac, we let them know. We will withdraw that and we will put it right back in as soon as we get that approval through." So it was the right decision. It's a decision that's fully supported by the partner, and we will work through that. Jessica, do you want to give a little bit more context on that and also the Chewy side of things in terms of the regulator? Sure. Hi, everyone. So with Prop 103, when we reached the settlement with California, what we decided in that settlement dealt only with Pets Best and with Trupanion. And as part of that settlement, that's when we agreed to stop underwriting new business for Pets Best as of March 1st, 2023. That settlement did not deal with new products. And so we're still having ongoing conversations with the department and with the regulators. We have a really good relationship with them. We're constantly in communication to figure out what is the best path forward for Aflac and for Chewy, given the complications of Prop 103. I should also point out that Prop 103 is not a problem unique to Trupanion. It's something that is affecting all players in the industry. Prop 103 initially was out there to address Home and Auto. For the longest time, there was no focus on Prop 103 in the Pet Insurance world. Now the regulators have caught up and they're starting to apply Prop 103 more aggressively to Pet Insurance. So as part of those conversations, we made the strategic choice to pull the Aflac filing at this time. But those conversations about Chewy and about Aflac still continue with the regulator so that we can find a path forward for both of those products giv-en Prop 103. Do you want to talk a little bit more about Chewy specifically and where they are right now in the discussions? Do you want to or? Yeah. Where we are is. We're working with Chewy as a partner to evaluate a number of options that we have on the table. So we're in active conversations with them. We ultimately want to land at a solution that's right for Chewy, right for their customers, and so those conversations are ongoing. That's the curren t status. Just in terms of the 10%, I think what Bradley was alluding to there, the combination of Chewy and Aflac and our new products, we don't anticipate to contribute more than 10% year-to-date. It is true, however, that because of our PAC spend and lowering our PAC spend, you will see growth deceleration. The beauty of having the additional lines of business that we work and support allow us to continue to grow. Had we not had them, we would have seen that deceleration even further down. That's just to give more clarity around that point. As I noted ahead of the break, we have had a number of questions come in throughout the course of the day into the online webinar. So I'm going to summarize a few of the questions that we've received around key themes, one of which has to do with recent management changes. And really, if the team can provide some additional rationale, particularly around the decentralization that the organization has taken place, and what does that mean, how does that come to light? Sure. Brenna, do you want to? Sure. So when you think about the evolution of Trupanion and our growth trajectory, when we were a smaller organization, fewer people, decision-making was centralized and very fast and speedy. Now that we've grown, one of the things we can't lose is that ability to make decisions quickly and to make sure that the people who know the best can get to the granular level of detail that we need to support our P&L owners. So in decentralizing, what we are doing is pushing down that decision-making authority and knowledge to those individuals who are closest to the market and aligning them to our P&L owners. And that will ensure that we get the granular level of detail we need to make the right decisions. It will ensure that we have speed and continue on our growth trajectory. And so those were the decisions that were made in March with the management changes. And it was a natural evolution and just part of our growth strategy. And so we've started the implementation. You'll see it as you've been talking to the pricing team, hearing from them, looking at legal. We've got great talent who know their area of expertise very well. And now we'll partner them up with the P&L owners so that they get the information they need, we'll make quick decisions, and we'll continue to grow. And that was the reason behind the changes that we made in March. And that is how we will continue to move forward with the decentralization of those functions. Yeah. I mean, I guess from my perspective, and I'm thinking about particularly the people on the Acturial team who have been impacted by this decision, what I've been able to see over the last couple of months maybe is really I'm so proud of the Acturial team. They're just an amazing team. I'll get all emotional about them because they're so great. But it's been really wonderful to watch these people who are the experts at what they do. They know the data. They know what's going on. They're diving in at this really granular level. Being able to kind of have a louder voice and immediately reach out and be able to reach out to the GMs to talk about what's going on, thinking about where are we going to draw, how do we think about where we're going to keep enrolling in areas if we can't get our rate or not, or what does this impact mean, and how does that impact what we do in our filings, and just really being able to collaborate well. And it's just been a really I mean, you've now seen several people of the pricing team. It's much larger. We didn't bring them all down here, but it's just been really relieving to just kind of be able to open the team up and just really let them shine in their areas of expertise. Yeah. I have one complaint. Margi moved right next door to us now. So we get the questions pounded over the wall. And I like to hide our guys for time, so I could just use them by myself. But our guys are really good at querying data, really good at answering questions, really good at the analytical part. And I think it's really important for any actuaries to have a really good handle on what's going on in the marketplace. Regardless of what regulators are saying, regardless of what our Finance team are saying, we need to understand what the market is also saying. It's not the only thing, but it's a very important input. So by taking this well down, I think it should help us all to get that perspective. I'd also like to share a bit from Finance team's perspective. I would say Drew's story is a little bit different. This guy, in the past two months since the announcement, has been working as hard as before, if not more, to help with the transition. I just have my utmost respect. He's truly a man of character. He's actually sitting in the participant audience right now. Yeah. It's just a—I don't know how I'm a little bit speechless, but I'm really, really, really, really grateful for all the things Drew has been doing to this organization, to the Finance team. Under his leadership, we built a really strong Finance team. That gave me the backbone to take this role, to carry the team during this transition period. Yeah. And I called him multiple times, 10:00 P.M., during the night. I was like, "Hey, Drew, if you're still online, we have teams, right?" He's showing green, 10:00 P.M. Hey, can you—I mean, obviously, as a new guy, I have to work really, really hard. So 10:00 P.M. is not my bedtime yet. But I saw him. I was like, "Are you still free? Can you answer a question?" He said, "Sure." And he hopped onto a Teams call, video call, like 10:00 P.M. or 10:30 P.M. And we discussed for another 20 minutes. That happened multiple times. The recent time being two or three days before the transition, like last week. I mean, yeah. This guy is a mentor to me and a lifetime friend to me and to many of us. Okay. We'll go here in Kopion. Follow-up on the decentralization. I heard that pricing is decentralized to close to P&L owners. How about the pet acquisition spending? How is that decision-making today? We'll just start. Travis, do you want to talk about that, and then maybe Emily? Yeah. Happy to. So especially when we think about the management side of it, I was actually going to add, but I think one of the important things to know is I'm actually going to pull on one of your analogies that I really like, which is the speedboat analogy that where—is it yours, Brenna? Oh, it's a great analogy. But it's the analogy from Brenna and from Margi that we're all on this big ship at Trupanion, and we're all on the proverbial road or now the waterway down to San Diego. And by having decentralized teams in different smaller speedboats, we can move faster, we can make different decisions. Now, Pesh as a GM might decide, "Hey, we're going to go stop in Portland real quick for a quick beer at a brewery." I might decide, "Hey, Hawaii looks nice right now." So it allows us to make those decisions a little bit faster, a little bit sharper. And then working with the teams, getting it more specific now, not just using analogies. Getting more specific again, I mean, there's a lot of nuances that are happening in our markets as GMs or other P&L owners throughout the business of working together towards how can I help Jess's team in pricing make as informed of decisions as possible for how we price in this state or that state or this neighborhood or that neighborhood, or working with any other team around the business with how can we best see growth in these different areas and everything like that. So I'll just say for myself, and I think for our team individually, I think it's been incredibly empowering, which is, I think, a really great thing to have as well. Emily? Yeah. The only thing I would add to that is the insight that Vision has been able to provide in terms of seeing all of those different P&Ls, breaking out all of the channels, and actually having that insight. We've got five of my speedboats right here. It's been really helpful to have that as a tool to see where should we be spending more, where do we need to be pulling back, how do we manage that PAC budget across all of the different opportunities. It definitely creates some healthy competition, as Margi alluded to earlier. The support from Vision has been really instrumental in allowing us to do that. Congratulations, team. I didn't know Derek didn't even feel he needed to stand up to interject with any discussions. That's great. A quick follow-up on this Chewy, Aflac, and State Farm business. Do they belong to the subscription line in the statement? They do. Great. Thank you. Yeah. That's because we're viewing them as a similar margin profile. We're targeting 15% AOI and 30%-40% IR. So y'all are the low-cost providers and have all the best data. And so it hasn't been easy over the last 18 months. I'm wondering what kind of scuttlebutt you've seen in the market of how the other players are faring when they have higher cost structures and less good data. Well, I think from a competitive perspective, the TPs can certainly talk. David, who's the TP, sorry, can talk to what we're seeing there. I think, Tom, just in terms of conversion rate, when you see your numbers moving, what are you hearing? What are you seeing from a competitive perspective? Is it impacting? There's competitors out there. I would say we're not focused on competitors. Our biggest competitor is non-insurance and non-Trupanion. So for us, it's about actually utilizing our data to educate the market, to use the voice of the breeder as well as our data to actually prove that, yes, sadly, pets do get sick. They get ongoing illnesses and conditions, and they get them when they're young. So from a competitive perspective, we see them. We're not focused on them. And I don't know if there's anything else you'd like me to add, Margi. Probably not. I mean, I think you said it really well. We're not focused on them. We are aware of their pricing increases, as we talked about before. We know that there have been equally large increases going through across the whole industry. We can't fortune-tell. Aaron doesn't have a crystal ball, nor do I. But I think we can see what does the future hold? We know that we have data. We know we have early indicators. We know we're now reacting to them a lot quicker. I don't know of another competitor that has the same level of data that we have. I can assume that there is margin compression across the board, and we will focus on doing what we do. And we will continue to support the vet channel, and we'll operate and execute to get ourselves back to margin expansion. And having good competition is helpful. I mean, I think kind of Bradley said it when you have Lemonade and Trupanion pitched against one another on the website. It's actually good for us. You can demonstrate the difference between us and the value that we bring to the table. That will not change as far as Trupanion's concerned, no matter what happens from a competitive set. Thanks. Thanks again. I might have missed it. I apologize if I did. Could we spend a minute on the debt covenants and how we're feeling about those, how we're thinking about those? Sure. I think we have a slide for this one. So really, two things. Just a little bit of context. This is the Piper Sandler, the $150 million credit facility we currently have. And this is exactly pretty much screenshot from what we filed with SEC for such an important agreement. It's filed, I think, along with the 10-Q after we entered into a credit agreement. You can see there are only two very light financial covenants. One, minimum revenue by quarter. The other one, minimum liquidity. I think first question, why redacted the numbers? That's actually very, very easy to answer. I mean, first of all, it's very common to redact certain sensitive information. The reason it's sensitive is not because of us. It's actually because of the Piper Sandler lender's perspective. These are all private loans, privately negotiated loans, and they actually don't want this to be public so that when they enter, when they are having more deals with the other borrowers, so that other borrowers don't have the advantage to take. So that's pretty much the only reason that those numbers are redacted. Actually, as a fun fact, Drew and myself, we were fully involved in this over a year ago when we entered into the deal. Piper actually said, "We understand your business. We wanted to be a great partner, your primary lender for years. But we understand the growth story. We don't want to put too much restrictions. But we still need to have some certain level of minimum financial covenants. "You tell us how much or what you want." And actually, we had no idea. Drew and myself, we were like, "Okay, let's see what's the common practice." We were trying to find from other public companies who had borrowed from Piper Sandler a similar deal. We couldn't find it because it's all redacted like this. So that's the only reason it's redacted. But then I'll explain a little bit. Obviously, I cannot tell the numbers without Piper Sandler's consent, but it's truly a very, very light covenant. The first one, the minimum revenue, is you need to meet the revenue threshold by quarters through the five-year term loan. And the second one, the minimum liquidity is a number of cash you need to hold on hand. The first one, both of them, actually, I can say this very confidently. We have no problem breaking the covenants whatsoever. Okay. The first one, we have a big cushion, big buffer, even considering in the future, like Pets Best rolling off the revenue, let's say, from other business goes decrease. So we have no problem for that, and the second one, they didn't give us a number. We suggested they just accepted. I mean, it's a very minimum liquidity on hand, which is you need to hold a certain cash level anyway as part of your working capital. So we just have that number, and that's pretty much it. We haven't yet had a question for Jackie, so claims-related questions or vet trends. We've got a whole class of team members here. Please ask your questions. Question about claims. So, if the earlier slides in 2018, you had a revenue and installed base of X; today it's 2.5 X to three times X. It seems with new product categories, if we use an electric vehicle, electric vehicle nerds are the first ones that buy it, then it expands out to different demographics. If we take that and apply it to Pet Insurance, with market penetration increasing over those last five years, how is every new U.S. potential subscription customer have different claims frequency and behavior patterns than maybe the more evangelists of Pet Insurance when the penetration was lower? Jackie? Yeah. I can start. I don't know that we see a particular difference between people who have held insurance for a long time versus new people. I do think as more hospitals come on board and it's more prevalent that it is an option to pay vets directly in seconds, that we're seeing more of that. That has increased quite a bit in the last few years. But as far as insight that I have, I can't say that we see any difference between our historical customers and new as far as frequency and behavior. Yeah. I think we're still in the nerd zone. The penetration is so small that I don't think there's a big change in profile of the way people are filing. We'll go back there and then back to Johnny. Yes. A question concerning our pool. So in a way, can you somehow show that in a way the price increases you are now saying that you're pushing through should actually show there as well? Or can the mix affect? How can that be so big that it doesn't show there? What an amazing question. I'm so glad I have a slide for this. Why don't we go to. I want to start with slide. Can we go to the. I think the next one's. There's one in between there. Yes, this one. So I want to look. This is the one that this time period here is essentially the rate flow that we had expected. So we were talking at the end of Q1 about having about a 14%, 15% rate flow. And so the question that I get asked a lot is, how does a 15% rate flow translate into the ARPU that we actually realize on our books? Why isn't that also 15%? And so I put this waterfall together to kind of explain all of the different components of where ARPU may or may not be. And then I have some backup slides too to kind of help explain even these pieces more. So if we think about when we talk about having a 15% rate flow in March, that's March of 2023, we know that any time we're going to take an increase right now, it takes 12 months for that rate to roll through the book, right? So one 12th, we'll get it today. Another 12th, we'll get it tomorrow, next month, and the next month, and the next month. So when we're looking at an entire year's worth of ARPU, you need to take into account the rate flow, not, that's just in effect today, but the rate flow that was in effect for that entire 12-month span of time for the ARPU. So that's the first one is just being thoughtful of we've taken a lot more rate in the back half of 2022 leading into 2023 than we had in the first half. So that's part of it. Another piece of it, what happens is we know that when a pet renews, we have a great retention rate. So we know that. But pets still cancel. So the types of pets that would cancel, and I'll dive into this a little bit more, can impact that as well. So just because we filed a, let's call it, 15% increase, that doesn't mean that's usually going to be a range around that number. And let's say that range is going to be hypothetically, the minimum is going to be 10%, but maybe the maximum is 25%. Well, the people who got a 25%, those might be older pets, bigger breeds, etc. And so they might be the ones that cancel first, maybe. Or if older pets, I'll show you guys another slide later, some of the pets in our book that we have a focus on younger pets. So some of those pets that we enrolled before we were focusing on younger pets, well, they're older. They don't live as long, and so they may not be part of our book anymore. So that's a little bit of the renewal mix. And the next piece, which is another really big piece, is our new pet mix. And the new pet mix is a lot. I think of that as if all things were equal and our entire pet base stayed exactly the same, we should see a 15% lift in new pet ARPU. The thing is that this is a consolidated basis. You're not looking at this just for one state in one neighborhood. This number here is representing the entire portfolio of our business, U.S., Canada, across our whole book. And so what you're going to see here is that we are just the types of pets that we are enrolling today are not the same types of pets that we enrolled even last year, two years ago, three years ago. As you see shifts in our new pet business, that also kind of eats into what we realize. All of that should and does have if we go to that slide where the lines, yeah. This is kind of it. I put this up here because I thought it would be a really good visual representation of what I'm talking about in a different way. But essentially, if you look at our business over the last couple of years, you can see, I put the red line on our breed factor. The type of breed that we have enrolled today is generally renewing. They're staying put. What we're seeing is new pets that are coming on. We're seeing smaller pets, so maybe smaller dogs or cats. We've seen a really big lift in the number of cats that we're enrolling. And just seeing breeds come and go. They come in and out of fashion. Right now, a lot of small little oodle doodle things are really, really kind of in vogue, and people are buying them. And they're just, I don't know what else to call them because they always have a different name. So they're the types of pets that people are acquiring and insuring. And so we're just going to naturally see that our ARPU on those pets are just for those pets is just lower, and we have a higher percentage of them. You can see on our geography factor. I mean, we've kind of talked about this a little bit, but expanding our footprint into new geographies that are lower cost, right? So, really opening up our runway for enrollments and really stepping into areas where we really traditionally in the past hadn't been as focused or enrolling, and now we are. And so you're going to see that average geography factor come down. And then as well, the average age factors. So just really, truly doubling down and really focusing on not that we don't want to enroll a pet at an older age. We like all pets. It's just the pets that we enroll that are younger. They're always going to have a better customer experience. They're going to stay with us for longer. They're going to have a higher lifetime value. And that's where we want to really focus our efforts. And it's showing in the type of pet that we're enrolling. So I hope that answers your question. I mean, there's a lot that can go into that as well. I just want to add that it's one of the reasons that I don't pay a lot of attention to ARPU. I mean, our mission is to make margin. And if these lower-cost areas or lower-cost breeds are making margin, I'm happy as I can be. If they bring down ARPU, that doesn't matter to me. Now, obviously, there's a lot of different interpretations of ARPU, but it's really about hitting margin on every one of these pets regardless of where they are in the cost spectrum. And it just happens to be that we're getting a lot of lower-cost pets either because of geography or breed, as Jess explained. So then answer the question. I know this is a hot topic. Sorry. Just a follow-up to that. It's Jon Block from Stifel again. I don't know if I'm thinking about this the right way, but you mentioned the new pets coming on, that helpful bridge, and it was very helpful, but they're lower ARPU pets. So aren't you overstating IRR? In other words, you're running the, but you're running the ARPU over your entire book of business. But if you're bringing a cat on at $40 ARPU instead of your total corporate at $62, right? But in your IRR calculation, you're running it on the $62, not on the $40. You're overstating your IRR. What a great question. Thank you for asking that question. You are absolutely right. What we're doing now is this has been a very recent change we've been talking about and really kind of seeing that accelerating. We are looking at our new pet ARPU, and we will be providing clarity on new pet ARPU because, to your point, over time, we expect there may be a considerable difference between them as we continue to expand into these areas. So we will be conservative with our IRR assessment. So right now, when you look at this mix factor, it's been something that's really kind of occurred over the last year, but more aggressively in the last six months. We do look anyway at a granular level, but we will be addressing that within our IRR calculation. So we're not looking at total book. We're looking at new pet ARPU. Let's call Shweta. Thank you. I have a follow-up to your explanation. Thanks for that. So if you put it all together, what does it mean for 2023 ARPU and going forward? How would we think about it with all the mix of factors? I mean, that's a really good question. Really, what we're working on, I mean, as we have been learning more and exploring more and as our claims trends have been changing, we're now locked into this 15%. We have a much more solidified view of what we think we need to do with our ARPU to get there. And that is the modeling and the forecasting we're doing. I don't really have a slide, or I don't know if there is one to talk about what that exact number is. There is a slide. All right. Yeah. I think we bring up that orange-blue line slide. Yeah. The orange line, we showed this before. The orange line is the cost, and the blue line is the pricing or the ARPU. I feel like it's pretty much itself. But in terms of overall ARPU, we're thinking it's going to come in about 3% year-over-year growth. Based on what we're seeing today, that assumption hasn't changed. As that rolls through, the team, as they've mentioned, I think a couple of times, are continuing to put through rate increases. So that 3%, that's assuming cost of goods remains where it is as well. But that 3% ARPU, we expect there is some upside there with further new business that we get rolled through. But right now, it's a 3%. So I actually really appreciate this slide. But I'm trying to reconcile how we get to positive revenue growth when ARPU is flat quarter- over- quarter. So, can we talk a little bit more about how all of these headwinds that kind of affect the trickle-down of rate to ARPU are going to somehow allow for revenue to grow this much by the end of the year? Because these aren't one-timers that you guys are pointing out. These are headwinds that are going to continue to decrease the amount of rate we ultimately see flowing into ARPU. Generally speaking, revenue growth equals ARPU growth plus enrollment growth. So our enrollment, I think, is still 18%, 19% as of now, year-over-year. Yeah. So that's the reason you see roughly subscription business 19% growth so far as of Q1 2023. Does that answer your question? So it's pet and ARPU. So the two combined. Yeah. Pet counts and ARPU. So you're getting the overall book of business is growing, retention rate staying strong, plus the ARPU that you're getting from the new business and the existing book of business. So the two combined take the revenue, continue to expand. The first chart that I showed at the beginning with the cohorts, the vast majority of that revenue is coming from our existing book of business, and the retention rate is strong. So you're going to get the ARPU there plus the additional from the n ew pet. Okay. I guess maybe ask a different way. What is giving you the confidence that ARPU growth is going to remain 3% when things like mix shift into lower-cost pets is a trend that is likely going to persist for a while? How are you counteracting that or making up the headwind from it to keep ARPU at 3% growth? Aaron. I don't know how much if you can even. I don't know if you can jump bigger or higher. Yeah. Next time, I'll wave my hands a little bit more. No, I didn't notice it either. It took me a long time. I'll sit in the corner over there. So again. Mikel's kept me in a dark room for many years, asking me lots of questions. So I've had a lot of time to look at the data. Another way to look at ARPU headwind is to also think about it as claims headwind. Because as we look at a premium, that premium is really analyzing a risk. And if that risk gets less risky over time because we're enrolling all of the oodles, I think you said, and cats. Oodles and doodles. Oodles and doodles. The premium, the claims per pet per month are going to come in lower. So if we think that there's a 15% inflation in the market, if there's a 5% ARPU buy-down, that means that we'll likely see a 10% PPPM claims increase. So as the headwind gets stronger on ARPU, it's also going to get stronger on claims because we've accurately priced the relativities between our different risks. And that is not the same thing as trend going to 10%. Trend is still 15%, but we're going to see 10% because of the change in mix. Yeah. The mix and tax both. Yeah. Thanks, Aaron. I should never let you out. And Vince, we'll go over here to John. Thank you very much. You talked about the retention rate so far in the second quarter on a quarterly basis, not trailing 12 months. If we think about the investor day a year ago, you talked about loss ratio trends in the second quarter. Can you maybe talk about that as it relates to the second quarter of 2023 at all? Yeah. I mean, I think we don't have a slide for this, but Jess and the team touched on this earlier when we were thinking about our work. So we're assuming the 15%. So going into the quarter, we put that assumption in at sort of the end of Q2 with the data we saw expecting 12%. We got 15%. We thought 12% was high. 15% was outlandish. We have no reason to believe that 15 is not the right assumption at this point in time. When we see how kind of claims come through with severity and frequency in any given quarter, there tends to be a little bit of noise, volatility, just depending on either if there's a snowstorm or if there's something happening in a specific area of the country, or we have an increased rate of software that we've heard about. There are a number of factors that will change that, but it really nets out in a quarter. As we go into Q2, April overall, we saw a little bit softer than March, and May is looking virtually back at March levels. So between the two, again, you'd expect to see that trend through the quarter. And our 15% in terms of losses, we expect that. We're making traction. It will be slow and steady because we're waiting for our prices to come through. As those prices impact, what you'll expect to see is kind of the losses slowly kind of coming down by the back end of this year. We anticipate being closer towards a 71% target, again, assuming 15%. If we continue to see these rates coming through and losses stay at 15%, by the back end of next year, we'll be close to that 71%. That's the overall loss journey. If I can add from numbers perspective, I remember you said loss ratio. So Q1, remember our subscription targeted loss ratio 71%. Q1 is the 77.6%. In our guidance we provided a month ago, we have the AOI guidance. It's still the same, pretty much in line with a month ago. Our assumption, our forecast, is that the loss ratio for Q2 is going to be flat versus Q1. And I also want to say that this margin compression started from nine or 10 months ago. It's Q2 last year. So now it's almost four quarters. So keep in mind, we keep saying that 12- 18 months, the pricing actions we've taken will flow through. So if you think about that timeframe, the margin compression started about Q2 last year. So we'll start to see a meaningful, again, as the same inflation assumption, we'll start to see a meaningful margin improvement after Q2, starting second half of this year. Let's go to Maria. Thank you. Can we talk about PHI Direct and Furkin? How are these plans doing in Canada? Can you maybe talk about retention rate? Understandably, it's lower compared to your core plans. And then what's your kind of latest thoughts in terms of launching these plans in the U.S.? Emily? Yeah. I can kick things off before I hand over to A.J. and then to Paul. Just as a reminder, PHI and Furkin are our two other brands that we have up in Canada. Furkin is our medium ARPU, and PHI is our lower ARPU products. Overall, they're still working towards the same value that we offer through our Trupanion subscription product. So the value is still the same, just at different coverage and lower price point. The goals for those products are to a couple of different things. I would say we mentioned earlier when we were talking about the competition, leveraging PHI and Furkin alongside with Trupanion to really help educate the industry on what you're getting at different levels of ARPU. And then also help us just reach a broader audience in general. I'm going to let both of the guys speak to their retention rates, but for the U.S., so I'll just jump to the third question that you asked. For the U.S., we're looking at a couple of key indicators, key metrics that we need to hit before we'd be willing to launch in the U.S. So it's definitely still something that we're talking about, something that the guys are very eager to do. We're not quite there yet, but definitely on our roadmap and something that we'd be excited to do when the time is right. A.J., do you want to come up and speak to Furkin and then Paul for PHI? Thank you for the question. I traveled for this meeting, and I was beginning to get a little worried I was going to have to go home to my wife and 15-month-old daughter and tell her that I didn't even speak at the annual shareholder. Can we pull up? Oh, the Furkin slide is up. Thank you. So how are things going? I'd say we've made a lot of progress over the last 12 months, but there's still quite a bit of work to be done. Furkin was intended to operate under the same financial guardrails, 30%-40% IRR and 15% margin. When we look at margin for a business that's not even two years old yet, the most material pieces here are going to be pricing and our fixed cost. We've got an early indication that pricing has been pretty accurate. As the business continues to scale, our fixed costs are going to be amortized over a larger book of business. And so we are approaching that target margin. On the other metrics that we're looking at, PAC, conversion rate, retention rate, I would say these are all going in the right direction. But as Emily mentioned, we are excited about expanding, and there are some key metrics that it's my job to hit before we move forward. Can you give a ballpark of retention? Not quite Australia at 98.95%, but we're seeing an average duration right now of somewhere between, I want to say, 40, low 40s, 35s to low 40s months. So it's close to 98%. Thank you. Paul? And just a quick follow-up. And I know we're not there yet, but what does Prop 103 mean for launching your lower-priced plans in California? So right now, our focus with the Prop 103 lens is for Trupanion and Aflac, but as we engage with California on the discussions about how to work Trupanion and Aflac into our portfolio without having to offer all of our plans to everybody who calls us, we'll then expand those conversations to Furkin and PHI Direct. Hello. Can I see who asked the question? Hello, I'm Paul. I lead PHI Direct. So I'll start with a kind of high-level update on where the business is at, and then we can talk about the retention bit specifically. So I would say a second good foundational year for PHI Direct. We are, as a reminder, we're not just a low ARPU product, but we're somewhat unusual of a product in the category, particularly within North America. We've learned an awful lot about efficiency and scale and how to create positive outcomes from both because one of the things we've learned is when we reach really hard for one, we're compromising on the other. And then I think that informs what is a phase I distribution strategy, and that will. We moved into a phase 1.5 in time as well. That's about as much as I can say on that right now. Retention is more challenging for PHI Direct, so we're at about a 96%. So that equates to somewhere in the 20%s in terms of payments. I think just to expand on that, there's a few reasons that that might be the case, right? So we are having to communicate more at the front end about the product because it has a time-limited coverage, and it's our responsibility to communicate that. But not everybody knows that, right? Some people are signing up and find out later about that, and I think that can cause a retention risk. Then the second part is a testing plan that we'll roll out really soon, which is where we communicate, or one of the primary messages we communicate out of our PHI Direct is, "Hey, guess what? We're inexpensive Pet Insurance." What we drive is a cohort that is unusually price-sensitive, right? Their household income isn't as stable as Trupanion might experience of a normal sort of typical as opposed to a typical pet owner there. So we need to go and work out how do we communicate the fact that the value of the product alongside more than, "Hey, guess what? This is the price you should expect us to pay," and the price is low based on what other expectations within the category were determined. So a few things to learn. Yeah, another really good set of learnings. And then because we're D2C, I think both A.J. and I actually have learned an enormous amount about how to achieve incrementality from those core digital advertising channels in the way that I think is really useful across a broader swath of the business as well. So I'll pause there. Any questions? Okay. Thank you. Just to kind of piggyback on the retention that the two GMs have shared there, the main thing for us is we didn't anticipate creating these products to have equal retention to Trupanion. I know that you guys may feel differently. I don't think that we'll ever get PHI and Furkin to the same levels as Trupanion because of the nature of the product, because of the value, because of the complete coverage, because of the vet channel. We absolutely will be driving hard to maximize that retention rate. The key thing for all of these products, whether we're talking about PHI, Furkin, Chewy, Aflac, State Farm, any of our products, any of our P&Ls is operating within the same guardrails. So that retention rate has a direct impact on how much these different individual products can grow, and they cannot spend the same amount of money as a Trupanion product, but they absolutely have got the money there. And again, if the Internal Rates of Return are there, and to Mikel's point, the margin is there and it's priced appropriately, we'll absolutely be growing those products as well and gives us additional access to even more pet owners. Going to jump in here with a quick time check. We have about 15 minutes left with this group on the stage. So if there are any shareholders who are in attendance who've yet to ask a question and would like to do so of this group, please make sure you raise your hand and we'll get you the mic. Let's go over there. Thank you. Hi, it's Fabian Reckels from Flossbach von Storch, Germany. I think you have spent around $60 million on the new Vision software, if I'm not mistaken. Could you elaborate on the functionality of that software and why it has taken maybe a little bit longer to roll out? Thanks. Thank you for asking the Vision question. Chris, hi there. Hello. Yeah, so the two, if we think about why did we make the acquisition, there are sort of two main reasons. One, we wanted to enable the growth initiatives that we had. Our existing software that I helped create in 2009 was getting a bit old, and so going from one simple product to all of these products is a big deal. So Aflac, Chewy, PHI, and Furkin are all in that new technology. And so I don't feel like it took a long time in that regard. The Trupanion brand, which is much harder because we have about 80 systems under the hood that are all involved in making insurance happen for Trupanion. Moving from that to the new platform is substantially harder. And so that's the part that is taking the longest amount and what we're going to finish up this year. And why don't we take a moment to pull in Dewald? Because I know that you and your team have been working hard on when we migrate a huge system like Vision for our entire business, it takes an awful lot of training, and our people, we care about our people, want to make sure that we're doing right by them. So would you mind kind of sharing a little bit about how you're thinking about learning and development and partnering with Jackie and Brian and others to make sure we're set up to handle this beast of a system that Chris and his team have been working on for a long time? And I mean beast in a good way. Like with any system that you create, and especially a system like Chris's fault, I think often the hard thing is for people to kind of detach from the old technology and embrace the new technology. So what makes it really hard for us is when we work with our subject matter experts in claims and the Contact Center, we have to encourage them to not let us build another system that's the same legacy system as to really embrace what this new technology can do to make them more operationally efficient. What I really love about what we've done with Aflac and Chewy is we've done some work in this new system with Vision. So we could already see that it takes a lot. It's a lot faster for our people to learn the new system. Now, the tricky with learning is unlearning. Unfortunately for our other staff members, it's going to take them a little bit longer to unlearn the old system and learn the new system. For our newer team members, I'm really excited because it's going to shorten the learning curve, and it's going to get them productive in our workplace a lot faster. We've definitely worked with other groups like the Jordans and the rest of our team to see what downstream impacts can a system like this have. I make a tweak here, we make something better here, but what it can do for other people. We leverage our learning technology. We're really excited to look at new technology for our learning teams to think about how we can drive adoption, how we can make it easier for our people to learn these new systems. I don't know, I can carry on. I'm in learning and development, so I can run a three-hour leadership development session if you want to right now. Anything else? Does anyone have any other questions on Learning and Development while you've got the mic? Let's talk a little bit about leadership development then. How are you thinking about that? Yeah, we've actually brought leadership development in-house. As you can see, there's a lot of passion here. There's a lot of skills, a lot of talent. If you look at Glassdoor, you can see that there's a tension. There's a natural tension between our organically grown talents and our externally hired leaders that we bring in. And that happens like Trupanion is a culture of internal mobility. We want our people to grow up and to become business owners and think like business owners within our organization. But what I love from my world is when we start to work and you look with outside talent, our friends in Europe, our friends in Australia, when we bring people like A.J. and I, we start at the same time. And how can we kind of bring these two worlds together where we, as the externally hired folks who didn't organically grow up in this organization, how do I transfer the skills that I'm bringing from outside? And how do I leverage this great skill and talent for the folks who've worked here for years and years and years? How do they upskill me for the way we work here, the way we think here? And for me, that's what I love about our leadership program. Bringing it in online, it's like we can almost leverage each other. We work together. We help with the digital skills gap that's happened in the world for many organizations. So yeah, so that collaboration we spoke about earlier, you see it with our people. I mean, I love coming to the workplace at the moment. It allows me to have those informal learnings, to collaborate, to learn just about new people and how they work and how we impact each other. So yeah, so for me, I think that's great. It's a great way of having that programs in-house. Thank you. It saves us money, which is a good thing. I mean, I'm a P&L owner, so I look at my business as well in terms of what I can do to get our people ramped up into production and how can I make it as cheap as possible, but not sacrifice our employee experience, our member experience, and your investment. Well said. Thank you. It wasn't scripted at all. I love it. It really wasn't. That was actually real comments. Sorry. I didn't mean that to sound sarcastic. I have a follow-up question on PAC and your ability to continue to flex it down this year. Are there enough P&Ls with the right economics to achieve your subscription growth targets? Should we be thinking differently about growth or cadence this year? I can keep myself. I struggle not to look at the GMs that have got some growth movement that they could take more PAC dollars because then I'll tell you all where we're fishing, but just in terms of can we flex it down? Yes, we can. I mean, it gets harder as PAC reduces, and as somebody said, you start to kind of go into things that initially testing a lot, learning a lot. That sets us up for the long-term. If we're not doing as much testing, that's fine in the short-term. Yeah, we know long-term we'll kind of get back to that testing process, so I think that's what you see initially when you turn some PAC dollars off. It's really just we're focusing on today rather than building to our acumen to ensure we can continue to grow in the future. We know the PAC that it takes to enroll a pet in the vet channel. The vet channel is really where we're double down and focus. And having the territory partners and the alignment of the territory partners in their conversation absolutely helps. If we didn't spend anything else and we only had our TPs, we would continue to grow in the vet channel. That is the mode that we've created, and that mode's been getting deeper and deeper as M.J. and David showed earlier. And that for us gives us a lot of confidence. In terms of kind of the incremental growth we get on top of it, you absolutely should expect to see the pet count slow. As we talked about the new initiatives with Chewy and Aflac, that's helping to buffer that a little bit. What that ends up getting down to will be dependent on the margin. We will only be spending what we have in margin, and we will be keeping some of that Free Cash Flow in mind. So as we take that down, you're going to see PAC go down from where it is right now at the $250 levels. It's not going to be up at the $300, which naturally means therefore you're going to see a slower pet count. But we still have a lead volume coming through, and we'll be thinking about how we can be disciplined. And we absolutely have markets where we could spend. If we had the AOI, we would be spending aggressively to get the growth. We will not do that when we hold ourselves accountable for the Free Cash Flow at the end of the year. Would any of the GMs kind of add to how you think? Again, we touched a little bit on this before, but just as PAC, there are some areas, unless I'm mistaken, where we're being more aggressive with our spend and turning off others. Is that accurate? Yeah, no, definitely. And I think I mentioned this earlier too. That's where our alignment from a channel perspective and how we're deploying some of those PAC dollars with the GMs and really understanding where they want to be growing, what their margins are, and getting direction from them is critical. But yeah, I mean, we're certainly doing that. We definitely have some neighborhoods, some states that we've turned off all of our sales and marketing spend. And we have other states, neighborhoods where we're really accelerating it. So it's just about getting granular. Trupanion's referral programs have consistently produced a steady source of quite low-cost leads for the company over time, and those have scaled up pretty nicely over the long run. What progress remains to be had to ensure that that sort of lead source continues contributing a pretty strong percentage of gross adds over time? Yeah, Tom, do you want to kick this off? Yeah, I think if we think of referral, a number of things go into it, obviously. The brand perception, the experience that our members get, and obviously us communicating with our members to encourage that referral. We do know that when we spend on things like paid social, social media, etc., that that can also have an impact. And to kind of Margi's point in terms of looking how we deploy capital, we do expect that in certain cases that that may slow. But we have a phenomenal amount of members, and I really think we're only hitting the kind of the tip of the iceberg in terms of the potential that we can unlock by actually communicating more with our members and encouraging that referral far, far more broadly. So we've invested in certain things like new Refer a Friend programs, which are actually showing some early signs of success. And we expect we'll be able to do a lot more in the future with that. If we look at both Add a P et and Referral, we're seeing some shaky performance in terms of Referral, but Add a Pet is still performing very, very strongly. And actually, in the last month or two, we're seeing some good recovery on referral also. I'm not sure, Kelly, if there's anything you'd like to add to that? I don't know. Jess's waving her finger at me. I wanted to add who asked the question? Sorry. Oh yeah, so that direct pay. I mean, I think there's actually a great slide. I think it's a retention slide, but I mean, you could basically associate that slide with all the things that we're doing with that direct pay and how that directly impacts the referral network. So the more members that we have that experience Trupanion, and that experience is not having to pay out of pocket at the time of invoice, it's being able to pay their amount and leave and focus only on their pet and the care for their pet, that's when they refer their friends, and that's why they stay with Trupanion. Would you like to add? Yeah, I think that was really well covered, and thanks, M.J., for bringing up this slide because I think it really does illustrate it. That retention and Referrals and Add a Pet, they really all go hand- in- hand. So when we're providing an exemplary member experience, when we're doing what we say we're going to do, fulfilling our promises to members, when we're paying claims quickly, when we're paying them direct to vet, all of those things are going to help push us into a state of Trutopia, which is essentially when the number of cancellations are being offset by Referral and Add a Pet enrollments. And like I said, members who have those good experiences with us are going to stay with us longer. They're going to sing Trupanion's praises to their friends. They're going to add more pets if they have more at home. Clearly, we can see the partnerships we have with veterinarians and the Vet Portal penetration we have plays a huge role, and we see that reflected in territories that are in Trutopia and close to Trutopia. There's definitely a correlation there with the veterinary relationships and Vet Portal installs we have there. Kelly, on the screen, would you mind just speaking a little bit? This is our pathway to Trutopia. What is this telling us, and how do you feel about the direction this is going? Yeah, absolutely. Thank you. So you can see this is Trutopia. We have our Add a Pet and Refer a Friend as a percentage of book. We look at it as a percentage of book. So we're normalizing for the growth of the book as well as cancellations as a percentage of book. You can see we had some definite challenges there. We had our gap maintained pretty consistently and then start to widen in about December of 2022. And the primary drivers there were a slowdown in the growth of our referral channel, which Tom spoke a little bit to that. It definitely is impacted by strategic downshifting in spend of certain channels that aren't generating as much lifetime value for us. And a little bit in retention as well, impacted by inflation and associated rate changes to some degree. And we're seeing that start to come back down favorably, which you've also seen in Q2 retention reflected there as well. So we've seen getting back to positive year-on-year growth for our referral channel, which is really encouraging, as well as seeing members have a better experience through the renewal period through some of the changes we've made there. And we've seen some favorable retention impact there as well. So, hoping to continue to reduce that gap. And ultimately, our goal is to get it to zero, right? So our goal is to have zero or to have more members referring friends and adding pets than the number of cancellations. And I think we're set up for success to get there eventually. So we'll continue to work toward that. Excuse me, can we go back to the previous slide? I just want to make sure we're all accurate on the numbers. Just a question from me on the observation. How do we get 99.7%? That doesn't seem to be. It excludes pet passing away. Okay, it excludes pet passing away. Okay, thank you. Just wanted to clarify because that number is just alone, if it's overall, it doesn't make sense. Okay, thank you. Okay, right here. Just a quick follow-up on the same track. Do we have a chart to show the penetration rate progress for our core product in existing hospital? Anything like that? We don't have a chart to show it, but would a GM want to talk to Kalpesh, Travis? The penetration rate in hospitals, and obviously it differs, but how can you speak to that and how is that moving over time, especially over the last couple of years we've seen our growth rate continue? Yeah, so it's all related to the Refer a Friend channel and retention as I absolutely love this slide. I think this is, again, the problem that we're trying to solve is being able to pay claims at the time of checkout. The last 12 months has been super exciting in the veterinary channel in the sense of our growth that we've seen. In the last 12 months, we've added more hospitals to our Vet Portal than we ever have in a 12-month period. That's super exciting. In the last 18 months, we have doubled the percentage per month of claims that we're paying direct to hospital as well, which there's a slide on the percentage of claims that we're paying direct to hospital. We were at 15% in January of 2022, and back in May, this past May, we were at 30%, which is super exciting to see. Sorry, the question is about existing hospital. We already got in there. Our software is off. Is that penetration rate increasing all the time? What's the trend? Same store sales. Yeah, okay. Yeah. So we've been seeing really great growth in same store sales. So when we add a hospital onto our Vet Portal, we're seeing that they're continuing to issue more offers, activate more offers, and enroll more pets. I don't know if we have a slide for that right now, but we're continuing to see really great growth. Once we add hospitals onto our portal, continuing to add pets over time as well. That continues to go up. Okay, we're going to go ahead and take about a 20-25-minute break, and we will be back for our fourth and final session. Thank you. Hey, if everyone could take your seats, please. We're going to go ahead and get started. Not that hot. Oh, it's a sweaty person beside. [audio distortion] Yes. All right, we're getting started in one minute. I need you. You want to be mic'd up, but I need you. All right. We're going to start the fourth and final session with Margi and Darryl now. Time check: we have about an hour for questions. So please, if you have yet to ask a question and would like to do so, make sure you raise your hand. We'll bring you the microphone. We're going to just give a quick update on where we're at with veterinary invoices paid today. Yep. So this is now, thank you, Laura, ticked up another 317,000 since the last update. So now 1.2 million invoices paid today. You can see how much that moves, how quickly that moves. Okay. We're here to answer questions. Is it Maria? Yep. Okay. Thank you. Darryl, what would you say are some sort of key misconceptions about your story right now, and how would you address those for investors? I think one of the. I've been facing this same perception for over 20 years. When I started the company, I said, "We're just going to be a cost-plus model and that we're here to support veterinarians. And if we're given the best value and the best product and the best service, that's what the type of clientele that we want, what matters." Every time there is something that is going on in the world, a recession, 2000, 2001, 2007, 2008, when there's been regional challenges, like there was in Alberta with the oil crisis, I think, in 2004, everybody moves to the point of saying, "I don't think people are going to afford this." And time after time, it's been proven with retention rates that we just showed you quarter- to- date that when you have the right product being sold the right way through the right distribution channels, you can have a sticky customer. In fact, when things are more uncertain, the demand or the need for the product is greater. I think the veterinarians understand it. I think people that graduated from Wharton and finance schools and other areas, it's sometimes harder when you take an analytical lens and they took Economics 101 to realize that pet owners don't think about their pet as discretionary. They think about them, particularly our clients, as part of the family, and anytime somebody were to change from Pet Insurance to health insurance for your child, everybody gets it. Nobody wants to buy the cheapest health insurance for their child, so I think that's probably the biggest misconception. That's been one I've been seeing over. It's a repeat thing. Darryl, can you please share life of Darryl? What do you do every day? I love that question. Well, I mean, there's a two-part question. My wife is not here, but my biggest thing is to try to make my wife happy, and she is happiest when I'm working. I am woken by an alarm clock almost every day of my life. I would naturally sleep a lot longer. I'm an incredibly good sleeper. The alarm typically goes off somewhere between 5:00 A.M. and 7:30 A.M. in the morning. I may have, nowadays, maybe a Zoom call or a Zoom meeting before I get into the office, maybe one or two. I typically get into the office, and almost every day that I'm in Seattle, I'm in the office. I'd much prefer to be in the office. Occasionally, I go and I'll have a little Zoom, or if I'm doing kind of deep analysis of something, I'll go hide out in my boat, which is like my getaway office. I'm spending most of my time today making sure that we have the right reporting and inspections that I need to see as this company gets larger so that I can understand how each P&L and each section and each department are scaling over time, how we are deploying our capital. Then, based on what I'm seeing, I'll typically interact with Margi. Margi and I meet almost every day for about an hour. I might say, "What's going on with this?" or, "Can you explain something on there?" I'm sometimes asked to help with new employee orientation. Margi has about five independent projects that I'm working on that are not meant to be distractions to the rest of what the company is doing. They might be project-based that I work on for 30, 60, 90 days. I've been working on a building project lately. That's how I'm spending the majority of my time. About 20% of my time is doing investor and IRR s tuff and the rest of it. And starting in January, I became Chair. And I've been putting in probably about 30% of my time with board members. We've added a number of new board members. We got voted today to move to an annual election. Looking at continually trying to upgrade the board for what we're going to need for the next 10 years and make sure that every board member has the right information so that they can have a good pulse of the business and understand what's important, what are the key drivers, what creates value, where the challenges are. And I'd say the last thing that I keep my pulse on, which is a little bit more difficult in a world where we've got people spread out and there's less people in the office as the percentage of our total headcount, but it's culture. We just opened a new team development center on the third floor, which has literally just got opened before the weekend so that team members that are spread out across the world or across the country can come together and spend a week or two weeks together. First of all, thanks so much for organizing this event. Super helpful, and it's great to hear from everyone and the entire team. So great job, and thanks so much. A lot of information that you've shared, for me at least, was very positive about growth and retention and all the different projects you have and the margin compression, hopefully just being a permanent, sorry, a very temporary thing. But for a management team that's thinking so much about capital allocation, there hasn't been any, as far as I know, insider buying going on. So it's not really a question here, but I don't know. It'd be fantastic to see that and maybe something to think about. I don't know if you want to talk about it or not, but just throw it out there. Yeah. I'm happy to talk about it. For people to buy, they have to have money. It may sound silly, but for many people on this team, they didn't come with a silver spoon, and a lot of their wealth has been created and is sitting in Trupanion stock. They're already very well aligned with all the shareholders, and it's difficult to ask people to, or I mean, if people wanted to, if they don't have the ability to do it, then it makes it difficult. For myself personally, I wanted to start Trupanion in 1994. I started a cigar business with a $5,000 credit card. I sold it for about $500,000, and I had put all of that into Trupanion. For the first five or six years of the company, I drew maybe about $40,000 or $50,000 a year in salary. I then had two kids, went to raise a family and do all of those things. By the time we went public in 2014, I told anybody that would listen that I was going to be doing a 10-year 10-5B plan and just do a 10-year dollar cost average with the goal that 20% of my net worth would be outside of Trupanion by 2025, and I've tried to stick to that. Several years ago, when the stock price was well ahead of what I wrote about in my shareholder letters, I didn't deviate off of it, although I was tempted just to sell the total balance of shares because I thought it was cuckoo for cocoa puffs, but I said, "I'm not going to," to stick with my word. I have looked at trying to buy shares. Because I've had a long-term plan, I can't buy for six months. Any gains that I would have would have to go back, be reverted back. I recently canceled or paused my 10-5B plan, which I really never intended to do. I'll restart it someday in the future, but I can't buy right now. Actually, on that topic, we did have an earlier question, and I want to follow back up with that. That was on the topic of the company considering share buybacks as a use of our capital. Maybe we could, while we're on that same topic, revisit that question. Do you want me to? I'm happy to start. How many times have I said that today? I'm happy to start. Just in general, when we think about share buyback, we have been to a stock buyback. We've been talking about this a lot over the last few years. And when our margins are where they are, we do not think it's the best use of our capital to do that at this point in time. As margins continue to expand, as we start to see more movement in that direction, in the event that the stock does not move, then yes, there would be a greater return for us to do that. But right now, that's not what we'll be doing. Yeah. When we started to have margin compression, we had an approved stock buyback plan. But as it was compressing, I just said, "It's not the right time to do it." We've had about four quarters of margin compression. We're now projecting that instead of it going down, it will kind of flatten in Q2 and then start to go back up over time. Capital's king. Cash is king. We're not cash flow positive yet. Although, I mean, if we found $1 billion under the couch, we would happily go and spend it, but that's not the scenario, the case we're in right now. We had a couple of team members that flew here and have not had a question. One of them is one of the newest members of the team. Malcolm, you oversee our DEIB efforts. This is an important part of our 60-month plan. Would you mind sharing, and maybe we'll listen to some questions from the audience, just a little bit about how you're thinking about it and the journey that you and your team have gone on to help bring us along from a DEIB perspective? Well, thank you. I thought I was going to sneak out of here without a question. DEI, I know a lot of questions didn't come up in the beginning, but regardless of all the questions you have, all the investor questions, at the end of the day, it takes people to make everything move. And so at this moment, whether you believe it or not, DEI is a part of this DNA, even in this room, to make things happen. So one of the things that we focus on from our team is really the culture piece, right? I know there's a moment in time, even in this room, you may feel excluded from something or excluded from your personal life or your professional career. When we talk about culture, we talk about decentralization, and we talk about learning and development, and we talk about people coming together to make this engine run and that we're becoming a global company. We need to have the bigger conversation of understanding the space that we occupy and the impact we have on people altogether. That becomes from decision-making. That becomes from collaboration. That becomes from innovation. Whether you believe it or not, this all has a business impact. When we talk about talent, recruitment, and retention, we talk about people feeling like they belong, where they can bring the psychological safety of conversation to say, "Hey, this is the better way we should go so that we have a better outcome for the organization." That all comes from a conversation around diversity, equity, and inclusion. You probably heard these buzzwords, and what does it mean? It just means understanding the people that you work with and being respectful and having the ability to understand how you impact them in a positive way. Right now, our team has built what we call our very first diversity, equity, and inclusion committee. I don't know if we have that slide together, but these are just some of the individuals that are here working for this organization that have put their time to volunteer and be a part. These are our subcommittees that we build out of our D&I subcommittees that really partner with some of these or some of our divisions in the organization. And so these individuals say, "How can we be available to talk about the humanity piece, the culture piece, and getting us to do the work and engage even better?" This is just some of our subcommittees. If you go to the next slide, this is what we have right here and what we've developed in our D&I committee. This is going to grow. We're talking about people volunteering their time and the organization and having passion about this engagement. So although we are talking about numbers and investing and business, at the end of the day, the most valuable product is people. And this is what our group is here to do, is to make sure that we create the culture, enhance the culture, build on the culture so that everyone can be able to bring part their best selves. So this is diversity, equity, and inclusion. This is just some of the first cohort. You'll see more of this coming through when we start talking about conversations of collaboration and engagement in this environment. I'm willing to take any questions. Thank you. Thank you. I have a question. Yeah. From Sheryl. I received the following email from Sheryl, who's also a former employee of the house. Emily, I know you're aware of the high-profile layoffs, but there are lower-level layoffs representing a divestment in things like IT, claims handling, and training development seem to represent a lack of long-term focus contrary to the off-cycle safety budget plan. However, also with the policy towards employment, I can tell that service metrics and claim handling priority have slipped far past what we would have allowed when I was there. I just received a notice of intent to raise premiums again. Coupled with the coming stock price, I can't understand what is happening and why the trends only seem to be getting worse, while Margi and Darryl insist I could manage well given the economic headlines. I'm worried and confused. Margi, or Darryl, can you explain to her why she shouldn't be worried and confused? Yes, I can. I also think that John Gallagher can speak to some of this as well. I'm not sure if he's still in the room, but just while he, if he is, if he can make his way up here. Just in general, as we think about the business, the way that we've been operating, the things we've been talking about, we need to live within our means. Over the last few years, we have worked hard to build and develop a system and infrastructure that allows us as a company to continue to grow and grow for the long-term. We're thinking very long-term, specifically in relation to the areas that you called out there with specific teams. There have been some adjustments in those teams because we have developed, as Chris said, the initiatives that we wanted to a point where we knew we would end up having to make some changes to the team because there isn't the work to sustain, and we're not going to keep people in the team. We cannot afford to do that if there's not a direct value associated. That's consistent across the board. As we think about our operations, as we think about continuing to be efficient, that means that there will be some changes in the team, and to the point earlier in the discussions we had, that doesn't always mean people will leave the business. What it means is there may be different roles and redeployment of talent to make sure that we can support them. It's also in our best interest as a company to ensure that we're adding value. We are staying true to our value proposition and being able to price appropriately and, like I said, live within our means. If we find there are positions that that's no longer the case, we will need to make adjustments, and we owe that to you as our investors to do that and to act diligently and be diligent budget holders. John, you stand up here, and I wish that you come and sit down here, and you can take the rest of the questions. What was the rest of the question? Just in terms of kind of the other team. Sorry. Any other teams or any other changes? I'm sure you're thinking about team and team efficiency, Yeah. So when we think about team and efficiency, I know I mentioned Vision earlier on, right? Eventually, the systems will get into a place where there's actually, we're going to be able to remove people out of some of the equations and put them into places that they become more valuable to us and do more technical tasks that machines can't, which is a value add for the member. They do more for us. They do more for the member. It's a value add all across the board. When it comes to kind of the service-level aspect of it all, we did see a rapid rise in claims frequency at the beginning of the year. Jackie and her team have been doing a diligent job along with Jordon and others to look at what can we do to increase automation. Vision plays a part of that. Also, enabling us to think about things differently that help us adjudicate those claims faster, i.e., records collection, data collection, and all of that stuff. So it's an ongoing puzzle that I know over the course of time, service levels are actually getting better as we speak each day. And obviously, a few months ago, we transitioned the claims data piece of the puzzle in Vision to a new system, and there was a learning curve. And there was a section of time where the claims service levels were not where any of us would want them to be. But what I'm happy to say is, since that switch now, over the past month or so, it's better than it was before for the last 20 years. So it's all about those incremental improvements, and there will be some bumps along the way, but overall, we're trending in the right direction. Thank you, John. And just to add on, I think the last bit there was about the rate change and the rate increase. This is what we've been talking about: 15% increase in cost of goods. People are getting rate notifications. They are getting communications. You've heard Kelly. You've heard a number of the team talk about it. We are coming through stronger, repeatedly every week after week. This is a classic example of somebody who is receiving that communication, and hopefully, they choose to stay with us. But we know that we will see some degradation, but we've seen it improving dramatically. So that's exactly proof of what we're talking about now. There will be renewals every year, and there will be rate changes, and that's in keeping with the cost of go ods. Thanks a lot. Brian Pirie, Reade Street. It kind of boggles my mind that up until, I guess, a month ago, you were categorized as an Inland Marine Insurer. And I wanted to ask if the speed of regulatory evolution has not been, I mean, I guess it's not surprising, but maybe just frustrating. And I guess as relevant to the story from here, where do you see the most risk in your regulatory relationships, and maybe what gives you the most optimism that the future will be brighter and more sort of responsive and thoughtful engagement from your regulatory relationships? Well, I believe it was last week. I gave you an extra few weeks. I know. Yeah. The NAIC, which is, so each state runs independently, finally agreed, since the first meeting I had in 2008 in Rhode Island, kicking this off to get started, that pet health insurance shouldn't fall into a category with a bunch of other low-frequency, high-severity, small lines of business. So that was recently agreed upon, and it is to take effect as of January 1st. Now, the first thing that happens is they'll start collecting information specifically for pet health insurance, and then from that, you will see appropriate rules, regulations, risk-based capital requirements, and everything that will make more sense. I'm pleased with the progress. I mean, if you asked me in 2008, did I think it was going to be 2023? I think back then, I thought it was going to take five or 10 years. So I was off a bit. But Gavin, who used to be our Former Legal Counsel, he was hired in as a Regulatory Attorney. We now have him focused exclusively consulting with us for a three-year contract, specifically working on category issues. And because he's not managing a team anymore, I think the speed and rate of change will continue to happen faster than it would have. But it'll take time, and it is what it is. It doesn't give a competitive advantage for one company versus another. I think it'll just help the entire category grow over time. What's the biggest risk in terms of regulatory interactions or future actions? What do you see as the biggest risk? Do you want to take that? I can do. And the question's for you. I mean, I assume it might be the same answer. I mean, just I think in terms of it's the same risk as it's always been, making sure that we can be timely with our rate improvements. I think the team has made clear today we have a lot of very strong relationships across the team from a legal perspective, from a pricing perspective, which sets us up well. Knowing the pressure that the regulators in the U.S. are under statewide makes it hard. You can't move that quicker. These are people who are working really hard for their constituents and trying to get the best result for their constituents as well as keeping businesses in a good light. I think building those relationships, continuing to lean into them further to just really help to show them the profile of when our rate changes will come, help to educate them on the industry will help us to pick those up. This has always been the case. This isn't new. What we're seeing today feels like it's louder because of the rate adjustment and because of the cost of goods. It is no different to five, 10, 15 years ago. With Model L aw coming through and with that change, we will start to see more attention in the category, which is good. So it mitigates some of that risk. But otherwise, I think that will be the only risk. Darryl? Yeah. Pre-COVID, I mean, years ago, I used to be more involved with the regulatory. I used to walk into New York Department of Financial Services myself. The person that was in charge of us would wear her golden retriever scarf every time I showed up. Her dog and everybody that was in the meeting was insured with Trupanion. There's no substitute for face-to-face relationships. COVID had made that more difficult. A lot of the state regulators are going through the same staffing challenges that veterinarians are. So they're understaffed. There's less face-to-face. We need to be diligent to get onto planes to get to know people because we are the expert in this category. We've been doing it for a long time. We have the broadest amount of coverage. We want to share risk fairly. We want to give the highest value proposition. It's exactly what regulatory bodies want, but they don't understand all the nuances in our business. There's always something that will come up. The better that we know them and that they make us the first call when they're interested, that's what we need to do. We need to invest in it. We need to catch up for what was lost during COVID. Can you update on Trupanion 2.0? I guess, how do things like lead conversion, ARPU retention, LTV compare to the corporate average of subscription? What are the plans to roll it out beyond where it is today? Maybe you could even say what states it's in today. I can. If Dr. Steve also wants to come and talk to us, but I can kind of give a high level. He asked if he could go home early for his kids, and I said yes, so he's not here. Why did you do that? Because I didn't think you were going to get mad at me. I'm joking. I knew you could hear me say that. So 2.0. So we launched this the second week of March in 2020. I think we all know what happened the second week in March in 2020. It was actually March the 13th that we launched the product. And we had gone so far that we decided that we would actually continue with the launch. So launched it under the veil in Florida of COVID. And initial signs there were really good growth, high lead volume, high conversion rates, very strong retention rates. Now, there's a caveat to that. When we priced this product, we had 100%, and it's really difficult to price a product at 100%. We didn't price it appropriately. We were never going to price it right, but we reacted well. The teams adjusted. They started to reprice it. We are still with that product, which is a more comprehensive product even than 1.0. That is still live in Florida. We felt like we had given it a really good test in Florida. In December of last year, we launched in three additional states. In Arizona, well, actually, the GMs can speak to this as well. I don't know if a GM wants to come up and share what they're seeing, but in Arizona, Texas, and a version of this in Maine. We've had the product live there for six months. It has been a very interesting exercise. We have not rolled it out broadly because we need to understand when the product is priced appropriately, what does the lead volume look like, what does that lifetime value look like. Overall, leads are strong. Conversion rate is not as strong. It's building. It's growing, but it started off very low. We have to learn to sell the product. Brian and his team have been working hard to really understand how to sell this product because it is a richer level of coverage. Overall, ARPU is much, much higher. To the tune of about $20 higher on average, it's significantly higher. Lifetime value retention is strong. So when we get the conversion rate, the retention is strong. However, we need to move, just much like we've talked about PHI Direct and Furkin, and we want to get to the point where those key metrics are all hitting green before we push harder on it. At this point in time, we're not going to look to expand that. We're looking at focusing on margin expansion for our existing 1.0 book. At that time, when we feel right, we will look to test and refine the rollout process. But it still needs, you'll probably get 2.2, 2.3 before it's positioned to broadly take it to the whole U.S. market. But it's a great test for us, and it's definitely something that the teams are getting more and more skilled at. Travis, you stood up. Did you want to speak to it, or were you just stretching your legs? Okay. Good. Thank you. Can I just, on top of that, at a high level, given everything in the last year, year and a half, either with regulators or from your consumers and policyholders, is there anything else besides you mentioned before, maybe having the increased flexibility of monthly price changes? Is there anything else at a high level you're thinking of in terms of product design for 2.5, 3, 3.5 going forward? No. 1.0 is an exceptional product. 2.1 is—it doesn't get much better than 1.0. I think for us, it's really about the GMs said it well. Kind of how do we leverage the software? How do we make sure that we're paying the vets directly? How do we continue to drive home that benefit and make sure that more than 25% of our members are experiencing it? Now, that's gone up significantly, as you heard, and as you saw. But really, for us, it's less about what do we need to change in the product because our product is very comprehensive. It is built for the life of the pet. The fact that we don't increase as a pet ages, our price just based on age alone. There isn't anything that we would want to be changing at this point in time. The main thing is how do we execute to service those members? And really, what we're looking at is just increasing the active hospitals, increasing the amount of people we can pay directly to vet, making sure that we have the partnerships and continue to have the partnerships with the veterinary professionals when we're supporting that team, and ensuring that our contact center, when they are called, are called because we can solve their problem in one call. For us, it's about more efficiency, less failures, if you will. Every time someone calls us, we deem that something of a failure. And I think it's really about servicing that member as opposed to changing the product because we feel confident with what we have is world-class. And Simon and his team will take adaptations of the product to suit international geographies as needed. Generally speaking, it's very strong, and it's not something that we feel like we need to deviate from. Part of your question asked about moving from existing members having to wait till month 12. It's something that we used to do historically. We moved away from it and went to 12 months for operational reasons because if you send out at the time, if you have 25,000 members and you send out rate notifications on the same day, then you get a lot of inbound calls and a lot of questions, a lot of activity, and then that dies off. And so for operational reasons, years ago, we wanted that spread out equally throughout the year. It seemed rational at the time. If we had not done that, our ability to get our margin back a lot faster, this meeting today would be very different. So it's something we need to work towards and figure out how we would be able to implement it and execute on it. It's not something that I think anyone should expect we'll have in place in six months. First of all, you would need to tell all existing members on a 12-month period of time if you're going to change something. So it would take a long time to roll it through. But I think in the next two to three years, we might want to see if giving people a 90-day notice or a 60-day notice, regardless if it's on month 8 or month 14, if that's beneficial to the pet owners, and then would help for this type of scenario. Wayne mentioned earlier, listen, the 1 in 25-year, 1 in 50-year event with this vet inflation. And I spoke to somebody in the hallway. By the way, this is happening in Australia. It's happening throughout Europe. It's happening everywhere. And every company has been caught off guard. Yes, we want to be better, faster, quicker than anybody else. But the question is, what do we learn from it? Are we going to be a better company because of the challenge that we're going through right now? And I think the answer is yes. I hope you guys feel that from the team members and the alignment and the moving to a decentralized approach and the impact that those are making. But that's what we need to do. We need to make sure that in three, four, five years from now, when we look back to this meeting or this period of time, that we say, "You know what? In hindsight, I'm glad it happened. We're better, and it's a much bigger impact when you're at $3 billion of revenue and not a billion. We're trying to get this year. We were hoping to be about $100 million of Adjusted Operating Income. I plan on being around this company when it's $1 billion of Adjusted Operating Income. Every one basis point means a lot of dollars, so how do we learn from it? How do we improve, and that would be a tool. But it wouldn't be a tool we'd be able to implement immediately. But in a lot of our jurisdictions, it'd be a lot easier to do that in Canada, and when you're rolling out new products in Europe, you can roll it out the way that you want to, so I'm excited to see how that plays out. Hi. Thank you for taking my question. Maybe towards the end, I want to ask a bigger picture question. Could you update us on what would drive the penetration of Pet Insurance in the U.S. from low single digit over the past few years to higher, like maybe 10%? What have been the key learnings you have so far in addressing pain points like the value proposition you mentioned and regulation, and especially amid the next shift to lower-cost pet we are seeing right now? There was a penetration rate question earlier, and I'm glad you kind of brought it up again. There are a number of regions, territory partners that we have where 10% and 15% of new pets being enrolled today are with Trupanion alone in a vet hospital. Somebody in the front row is doing it. It's even higher than that. But the key is great relationships with the veterinarian, talking to them when they're puppies and kittens, and making it part of the workflow and asking everybody to check in who their insurance is. That's how you increase penetration rate. And if you want to get to 10% or 15% penetration for the market, you get there one way: 10% or 15% of puppies and kittens for the next 10 years. You have to focus on the young pets. That's where you get the best experience, the best referral rate. Chasing an older pet or chasing it's futile because those clients call in, "Why is it a pre-existing condition?" Medical records take longer. Claims automation is more difficult. Veterinarians have harder conversations. We really need to focus on the younger pets, and you do that by having strong relationships with veterinarians, being a part of their system. We have a lot of pockets where that's happening. Those markets, by the way, are also in Trutopia. So Referral and Add a Pet are greater than it. We know what it takes. By the way, somebody asked about Europe. Is it going to take us 20 years? I hope it doesn't take us 20 years, but it's going to take us a long time to build those relationships. To get veterinarians to trust us is hard. We are being tested right now in a time of massive vet inflation. Veterinarians are watching us to see, are we going to limit our costs? Are we going to cap what we're doing? Are we going to fold to Wall Street to get our margins back? Or are we going to live up to our value proposition of being a cost-plus model? Trust is something that you earn over a long period of time. I don't know how to accelerate it, but we have better tools today than we did 20 years ago or 10 years ago. We'll continue to deploy them. If I can just add to that as well, when you think about the foundation that you lay through the vet channel, the secret to success in all of the industry, all the countries that have a higher rate of penetration than the U.S. today is they came through the vet channel. They started building partnerships. They have relationships. They understood what it took to have a good product. They created products designed to serve a need and solve a problem. That's what we've done. We are now leading a category that is starting to get recognized by big brands. Big brands are coming into space. They're choosing to partner with Trupanion. And we're choosing to partner with them to create more awareness. And as you start to do that, you move through the early adopter phase into more of a mass market approach because you have the buy-in and acceptance and normalization from the Chewy, the State Farm, the Aflac. That, for us, is what will start to move the needle. We've gone from a 3.5% penetration. We were 2% just a couple of years ago. That's starting to move. That snowball effect will continue to happen as we get more and more awareness of the category. As you have greater need, like you have today, more vets are going to be talking about it as a solution to cost of care. We'll see that coupled with the brand recognition of the big brands, the consumer brands coming in and saying, "This is a thing that our customers need. We want to affiliate ourselves with Trupanion." That will help us. And it will also help others come into the market that are good, reputable actors that will help us move the needle together. There is a lot of green space out there. And the trajectory we're on is very positive. Let's go to Jon. Thank you very much. Topic no one's asked about today, LandPaths, the food product. Can you talk about plans there? And then can you talk about your plans to geographically expand Territory Partner presence in 2023 or not at all? Thank you. Well, when I talk about I'll start with LandPaths. This is one of the projects that Margi has assigned to me because it's not impacting anybody else in the organization right now. WD-40, you guys read my shareholder letters about it took 40 iterations to come up with WD-40. We are trying to create the highest quality food that can be shipped directly to consumers in calorie-controlled portion size. We have passed 40 iterations. We have passed 50 iterations. We think that we might be going to AAFCO food trials on, I think it's iteration 64 or 65 within the next 90 days. AAFCO food trials will take a full six months. That has been going on. Some people think that we're spending $10 million a year on this. We are not. We are spending about $10,000 a month. The burn rate on our food initiative is very low. In the meantime, and I mentioned this in my last shareholder letter, we don't care who makes the food. If high-quality food can be demonstrated that the pets are healthier and we can actuarially prove that it deserves a discount, then we will offer a discount for those clients feeding high-quality food. I mean, I'm not interested in being in the food manufacturing business, but I do want to prove out that pets eating a high-quality food can have a better health outcome, and it's never been proven with large data before, so later this year, regardless if iteration 65 needs to go to 123 or not, we will be starting to do some testing with some established food brands to see how the messaging resonates with some of our existing members, and I'm very bullish on this idea and excited about it. But right now, it's low burn, making small prog ress. Ask again next year. Maybe I should get a different owner for it. You asked as well about plans to expand Territory Partners. The GMs are here, and they could speak to that. I don't believe we have very many vacant territories at this point in time. Jason, do you want to? Yeah, great question. The answer on current vacancies, we've got currently about five territories that have been defined, three of which have been vacant forever. Pittsburgh, if you're listening, call us. Two of the five are recent, basically long-term Territory Partners that are working on their exit strategy. We're in the process of backfilling those opportunities. What I am excited to share is over the last several months, we've grown our footprint of Territory Partners and associates. As a reminder, we have our territory partners who own the rights to the territory, and then they have their own workforce, sales force that work below them. They are called associates, territory partner associates. Over the last several months, we've grown that team by about 10%. So we're getting better exposure inside of hospitals. This business is not overly complicated. It's all blocking and tackling. It's showing up and making a difference. We're doing a better job at that than ever before. I think the biggest area of territory partner growth is going to be international, right? So the first thing you do is you add the ability to add another 25,000 hospitals, and then you're going to spend the next 10 years building out that territory partner force, sir. Back to Fabian. Thanks. We have heard from Wei that the cash run rate is basically 12 months, the current cash burn rate of $20 million, assuming that it stays at that level, which it probably won't, but that 12 months also includes the $40 million additional debt, right, so what's the likelihood that if the inflation indeed stays at 15% or below that until 2025, that we will see an equity raise until 2025? It depends on the team's ability to execute, so we're expecting margin expansion and Free Cash Flow positive by Q4. That's a goal. It's not a promise. That's what the team's trying to achieve and if we achieve that, then we don't need to worry about it. That $20 million run rate, we believe that to be somewhat conservative. $20 million was what we burned in Q1, excluding the GPIC funding. So if we assume $20 million going through the rest of the year, which, like I said, is conservative, then we'll be at a $60 million run rate. And we're working at how do we continue to get more efficient there, to Darryl's point, to ensure that we can protect that cash as well as ensure that we are growing well within our means. We have about 10 minutes left for questions. Hi. Thank you for taking another question from me. I want to go back to the enrollment of younger pets as a big focus from now on because I don't really, personally, I don't have access to the data in this industry. So could you help us understand the demographics of younger pet owners, like their income level, their spending habits? I'm trying to gauge if this shift will increase competition and what's the implication for pricing and policy adjustment. Thank you. Talking all day. In terms of younger pets, we do not think about our target market by demographic. What we're thinking about is somebody who goes to the vet channel, who goes to the vet, sorry, and is thinking about that pet as part of the family. And that's when every pet that goes to the vet gets checked into a Practice Management System. And that's when the ideal scenario is a pet owner will be asked, "Who is your medical insurance provider?" At that point, you start to normalize the conversation. That means every puppy and kitten has the opportunity to insure. We start the conversation. They're people who are listening to their vet. They're going to their vet with their puppy and kitten. They want the best start in life for their new pet. And at that point, you start to engage them to really help to educate them on that journey and what it takes to be a good pet owner. So right now, as we're in kind of that early adopter phase, we're speaking to those people going to the vet channel. The demographic varies. I would guess if I asked by a show of hands how many of you take your pet to the vet every year for an annual wellness check, you're going to see everybody raise their hand. Most people that have a pet, I would hope, would raise their hand. Why don't we do that? How many do that? We're all different people. There is no kind of secret sauce. It's not the car we drive or the who didn't raise their hand? [audio distortion]. Fair enough. It's more about the education. It's more about understanding and making sure that we are speaking to people who want to take care of their pet in the right way, and they have an understanding of what the cost of care could be over time, and for us, as we think about income levels, it varies. We've done the assessment. Now, you might say we over-index in certain pockets, but then you look at a different market, and we under-index in that particular area. The age isn't a thing. The income isn't a thing. It's what that pet means to you and how you want to take care of that pet, and when it comes to the crunch, you will do anything to protect it. When there are those people whose heart breaks when they think about having to put their pet to sleep because they couldn't afford the care, they're the people we're speaking to. The only demographic that our product doesn't work for are billionaires, maybe people that are worth $100 million. But when a vet bill can be $40,000, $50,000, and that can happen in 48 hours nowadays, there aren't many rich people that would just fluff that off and say, "No problem." The lower the income of the household, the greater the demand and need for the product is. Young people that don't have kids probably don't have access to as much credit, don't have as much equity in a home. Their ability to need a way to budget is super important. But baby boomers, as we all know, they're empty nesters in how they think about their pets and what they're doing with them. So our market is very wide. The consistency is these are people that love their pets, think of them as family members, the next closest things to their kids, sometimes better than their kids, sometimes better than their spouses because at least they love them unconditionally all the time, even if they come home late from work. But it's a wide untapped market. And at 3.5% market penetration, we've got decades to go. And by the way, I've been saying this for decades. I mean, we've been growing. Can you put up the chart with the colors? [audio distrotion] While we're using that implication, surprisingly, just quickly, just to kind of tack on to that, younger pets, it costs less to insure when they're younger. So if you go and you try and enroll a pet at 10 years old today, it will be a high premium because we know the cost of goods for that pet. So again, I think Jessica's mix of the business. We talk about the mix within that. Age is definitely part of that. If you enroll puppies and kittens, you're going to see a lower ARPU initially, but it will go for a much longer term. Now, when I look at this chart, and I know what it looked like the 10 years before this chart started, it looked the same. It's not incredible execution. It's monthly recurring revenue in a large under-penetrated market. Another chart we need to start to show is our Adjusted Operating Income, and this year will be the first year where it will be smaller than it was the year before, but it's not going to move four or five years back. It's going to move one maximum two years back, and for a company that has this consistent results in a large under-penetrated market at a time when vet inflation has impacted everybody in the category everywhere in the world with the model that we have, it's a consistent business model, and we have a long way to go. Final question. Okay, then I'm going to turn it back over to Margi and Darryl for closing comments. Okay, well, first of all, I just want to echo the thanks to Michelle, Aria, and Laura. You've done a fantastic job putting this on. So thank you very much. Laura and team, I should say, sorry. This has been a real team effort, so I'm very proud and humbled and deeply grateful for all of the wonderful team that have been here today and representing and answering your questions. I hope that you have recognized that what we have today, as Darryl just said in with this chart that was on the screen, how predictable, how we are growing in a sustainable fashion. We have more active hospitals than ever before. We are paying the vet directly more than ever before. We have doubled our addressable market. We are able to continue to grow our lead volume, our conversion rate, and our retention rate, which allows us to be able to create more of an ecosystem to support the pets that we are all here to support. We probably paid about $1.4 million today before the day is out. That is testament to the mission that we're here. And we will continue to honor the investment and the trust that you put in us to make sure that we do you proud as well as the pet owners that have put their trust in us. So thank you for joining us today. Your questions have been great. And the team, you've been wonderful. And Darryl? Thanks for making the pilgrimage. It means a lot to us. So thank you.